our vision - capital markets authority kenya mumias.pdf · certified public secretary (kenya)...

111Sweetening the lives of kenyans while powering communities

Vision, Mission and Core ValuesVision, Mission and Core Values

Our VisionTo be a world class integrated

producer of sugar, green energy

and related products

Our MissionTo consistently satisfy our

customer needs through efficient,

innovative and ethical practices

while meeting the diverse

expectations of other stakeholders

MSC shall gain competitive advantage

through its empowered, talented, energetic

and passionate workforce who shall be

committed to the following values:-

• Quality products and services to our

customers

• Excellence in team driven performance

• Ethical business practices

• Responsible corporate citizenship

• Safety, health and sound environmental

practices.

Our Core Values

Sweetening the lives of kenyans while powering communities

20132012201120102009

8000

14000

18000

4000

0

Net Turnover (Shs ‘billions’)Sugar Cane Processed (‘000 tonnes)

Performance HighlightsPerforManCe HigHligHts

Performance HigHligHts 3

five Year summarY 4

value added statement 5

corPorate information 6

sHare Holding information 7

notice of tHe annual general meeting (agm) 2013 8

notisi Ya mkutano mkuu wa Pamoja wa mwaka (agm) mwaka 2013 9

Board of directors 10 - 11

cHairman’s statement 12 - 13

riPoti Ya mwenYekiti 14 - 15

management team 16

managing director’s statement 17 - 20

riPoti Ya meneja mkurugenzi 21 - 25

corPorate social resPonsiBilitY 26 - 27

corPorate governance statement 28 - 29

rePort of tHe directors 30

statement of directors’ resPonsiBilities 31

indePendent auditors’ rePort 32

statement of comPreHensive income 33

statement of financial Position 34

statement of cHanges in equitY 35

statement of casH flows 36

notes 37 - 84

aPPendix i - iv 85 - 88

ProxY form 91

fomu Ya uwakilisHi 92

1,917 1719.92,2452,3182,161

20132012201120102009

-

500

1,000

1,500

2,000

2,500

Sugar Production (‘000 tonnes)

173

236231

20132012201120102009

0

50

100

150

200

250

300236

Rendement / Sugar Recovery Rate(%)

9.0%10.5%10.2% 10.7%

201320122011201020090.0%

6.0&

12.0%

10.0%

8.0%

2.0%

4.0%

ContentsContents

AnnuAl report & finAnciAl stAtementstwenty tHirteen2 3Sweetening the lives of kenyans

while powering communities

155421579515618

11792

147.3

16000

1200010000

6000

2000

11958

Earnings Per Share (Shs)

1.3156862751.263398693

1.027450981.052287582

20132012201120102009

-1

1

1.5

0.5

0

-0.5

-1.5

-1.09

Period

Profit Before Tax (Shs ‘millions’)

1764

2647

2180

1193

201320122011200820090

1000

2000

3000

-1000

-2000

-3000

-2236

Period

Period

Period

Period

Period

8.57%



Financial Impact on Various Stakeholders

Value added StatementValue added stateMent

CUSTOMERS

Net Cash from our activities

Kshs 11,958 million

EMPLOYEES

Staff Costs

Kshs 2,163 million

1,932 Employees

GOVERNMENT

Taxes

Kshs 2,532 million

SUPPLIERS

Purchases

Kshs 4,540 million

BANKS & FINANCIERS

Interest & Charges

Kshs 477 million

COMMUNITIES

Corporate Social Investment

Kshs 29 million

KSB

KSB Levy

Kshs 446 million

FARMERS

103,950 Farmers

Cost of Cane = Kshs 6,071 million

Credit to Farmers = Kshs 2,608 million

2008/09 2009/10 2010/11 2011/1‑2 2012/13 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000

Turnover 11,791,708 15,617,738 15,795,300 15,542,686 11,957,823

Cane purchases from out growers 4,923,637 6,630,910 6,536,896 6,588,976 6,070,735

Grossprofit 3,310,968 4,884,538 5,446,730 4,487,707 1,548,248

Profitbeforetaxation 1,193,161 2,179,874 2,646,575 1,764,029 (2,235,999) Taxation 416,811 (607,491) (713,350) 248,650 566,283 Profit after taxation 1,609,972 1,572,383 1,933,225 2,012,679 (1,669,716)

Shareholders’fundsatperiodend 10,039,469 10,999,852 14,476,007 15,723,686 13,288,970 Grossprofitmargin 28.08% 31.38% 34.4% 28.87% 12.95% Returnoncapitalemployed 11.88% 19.82% 18.28% 11.23% (16.83)% Numberofshares,‘000 1,530,000 1,530,000 1,530,000 1,530,000 1,530,000 Dividends 612,000 612,000 765,000 765,000 - Dividendspershare,Shs 0.40 0.40 0.50 0.5 - Earningspershare,Shs 1.05 1.03 1.21 1.31 (1.09)

DirectrevenuetoGovernment bywayofValueAddedTax,ExciseDuty andIncometaxes 1,514,156 2,496,155 2,227,900 2,568,269 2,978,278 Staff costs: Management 907,541 1,129,231 954,974 1,136,712 1,150,448 Non‑management 716,778 847,141 973,662 876,675 1,012,610

Total staff costs 1,624,319 1,976,372 1,928,636 2,013,387 2,163,058

Registeredfarmersatperiodend 84,567 89,012 104,489 115,002 103,950 Areaundercane(Ha) Nucleus estate 3,722 3,554 3,683 3,637 3,697 Outgrowers 62,818 55,543 58,580 59,715 53,116 Caneprocessed(ThousandTonnes) 2,161 2,318 2,245 1,917 1,720 Sugarproduced(ThousandTonnes) 231 236 236 173 147

Categoryofpermanentemployees: Management 588 541 579 606 626 Non‑management 1,112 982 1,225 1,290 1,306

Total 1,700 1,523 1,804 1,896 1,932

Appendix V - Five Year SummaryfiVe Year suMMarY

For the Year Ended 30 June 2013



DIRECTORS MrJVBosse -Chairman MrPKebati -ManagingDirector MrHenryK.Rotich -(alternateMrsEKoimett) Mr J G Chege Mrs S K Serem MrFKKigen MrEMMukabanah Mr C Otolo MrN.Namenge MrJOpindi MrsNKaminchia

BOARD COMMITTEES

BoardAuditCommittee MrCOtolo -Chairman MrsEKoimett -(alternatetoMrRotich) Mr N Namenge MrFKigen

BoardHumanResourceandStrategyCommittee MrFKigen -Chairman MrPKebati MrsEKoimett MrsNKaminchia MrEMMukabanah Mrs S K Serem

BoardTenderCommittee MrJGChege -Chairman MrEMukabana MrJOpindi Mrs S K Serem

BoardProjectsCommittee MrJOpindi -Chairman Mr J G Chege MrFKigen Mr C Otolo MrsEKoimett MrPKebati COMPANY SECRETARY MrsEmilyOtieno CertifiedPublicSecretary(Kenya) PrivateBag,Mumias

REGISTERED OFFICE MumiasSugarCompanyLimited PrivateBag,Mumias

REgISTRARS ImageRegistrars POBox9287-00100 Nairobi

BANKERS KenyaCommercialBankLimited BarclaysBankofKenyaLimited TheCo-operativeBankofKenyaLimited CFCStanbicBankLimited

ADVOCATES EKOwinyi&Company HamiltonHarrison&Mathews Prof.Ojienda&Associates MohammedMugai&CompanyAdvocates WetangulaAdanMakokha&CompanyAdvocates

AUDITORS Deloitte&Touche CertifiedPublicAccountants(Kenya) DeloittePlace WaiyakiWay,Muthangari POBox40092-00100 Nairobi

Corporate InformationCorPorate inforMation

MAJOR SHAREHOLDERS

Themajorshareholdersonthecompany’sshareregisterasat30June2013wereasfollows:

Number of Percentage shares holding1 PermanentSecretary,Treasury 306,000,000 20.00%2 KenyaCommercialBankLimited 26,322,100 1.72%3 StandardCharteredNomineesNon-Resd.A/C9894 26,044,467 1.70%3 TheJubileeInsuranceCompanyLimited 22,335,002 1.46%4 StandardCharteredNomineeAccountKE14353 14,545,593 0.95%5 AbdulKarimCharturbhaiPopat 14,400,000 0.94%6 BaloobhaiChhotabhaiPatel 14,057,100 0.92%7 StandardCharteredNomineesA/C9098AC 10,109,575 0.66%8 PradeepPatani 8,961,002 0.59%9 StandardCharteredNomineesNonResdA/C9573AC 8,859,000 0.58%11 Others 1,078,366,161 70.48%

Total 1,530,000,000 100%

DIRECTORS’ SHARE HOLDINg

Thedirectors’directandindirectinterestsintheordinarysharecapitalofthecompanyasat30June2013wereasfollows:

Number of sharesPermanentSecretary,Treasury 306,000,000MrPeterKebati 51,000Mrs Sarah Serem 7,500

306,058,500

SHAREHOLDERS’ PROFILE

Category Number of Number of Percentage shareholders shares HoldingLocalindividuals 131,902 786,467,413 51.40%Localcorporate 4,042 617,222,905 40.34%Foreigninvestors 667 126,309,682 8.26%

Totals 136,611 1,530,000,000 100% SHARES DISTRIBUTION SUMMARY

Shareholding Classification Accounts Number of Shares Shares %1to500 23,330 5,490,630 0.36501to1000 40,858 28,423,600 1.861001to5000 50,680 117,100,788 7.655001to10000 10,728 75,779,474 4.9510001to50000 8,669 181,558,337 11.8750001to100000 1,098 78,365,331 5.12100001to500000 972 202,249,559 13.22500001to1000000 140 99,375,558 6.501000001to2000000001 136 741,656,723 48.47 Total: 136,611 1,530,000,000 100

Shareholding InformationsHareHolding inforMation



NOTICE IS HEREBY gIVENthatthe42ndAnnualGeneralMeetingoftheCompanywillbeheldatTomMboyaLabourCollegeonFriday6December2013at10.00amtoconductthefollowingbusiness:

1. Toreadthenoticeconveningthemeeting.

2. Toconfirmtheminutesofthe41stAnnualGeneralMeetingheldon7December2012

3. Toreceive,considerand,ifapproved,adopttheFinancialStatementsfortheyearended30June2013togetherwiththeDirectors’andAuditors’Reportsthereon.

4. ToelectDirectors:

(a) Mr.SakwaBunyasiresignedfromtheBoardinthecourseoftheyearthuscreatingacasualvacancyontheBoard.UnderArticle95ofTableAoftheFirstScheduleoftheCompany’sActandArticle114oftheCompany’sArticlesofAssociation,DirectorshavepowertoappointadirectortofillacasualvacancyontheBoard.Inthecourseoftheyear,Mr.DanAmeyowasappointedadirectortofillthevacancyleftbythedepartureofMr.SakwaBunyasi.ShareholderswillratifytheappointmentofMr.DanAmeyoasDirector.

(b) Mr.EdwinsMukabana,Mr.JohnBosse,Mrs.SarahSeremandMr.HenryK.Rotich(CSTreasury)areduetoretirebyrotationinac‑cordancewitharticle113ofthecompany’sArticlesofAssociation.Mr.Rotich,MrsSeremandMr.Mukabanaareeligibleforre-electionbutMr.BossewillberetiringfromtheBoard.ShareholderswillelectsuitableDirectorstofillthesepositions.

5. ToconsiderandapprovetheDirectors’feesfortheyearended30thJune2013

6. TonotethattheAuditors,DelloitteandTouche,beingeligible,continueinofficeinaccordancewithsection159(2)oftheCompaniesAct(cap486)andtoauthorizetheDirectorstofixtheAuditors’remuneration.

7. Anyotherbusinessforwhichappropriatenoticehasbeenissuedandreceived.

BY ORDER OF THE BOARD

E K OTIENOCompany Secretary

Date:2ndSeptember2013

Note:

1. AnymembermaybynoticedulysignedbyhimorheranddeliveredtotheSecretary,notlessthan3andnotmorethan21daysbeforethedateappointedfortheAnnualGeneralMeeting,givenoticeofhisintentiontoproposeanypersonforelectionasdirectortotheBoard,suchnoticeistobeaccompaniedbyanoticesignedbythepersonproposedindicatinghisorherwillingnesstobeelected.

2. Amemberentitledtoattendandvoteatthemeetingandwhoisunabletoattendisentitledtoappointaproxytoattendandvoteonhisorherbehalf.Aproxyneednotbeamemberofthecompany.AformofproxymaybeobtainedfromtheCompany’swebsiteorfromtheCompany’sshareregistrars.Tobevalid,aproxymustbedulycompletedandsignedbythememberandmusteitherbelodgedattheofficesofthecompany’sshareregistrars,ImageRegistrarsandCertifiedPublicSecretaries,8thFloor,TransnationalPlaza,MamaNginaStreet,P.O.Box9287,PostalCode00200G.P.ONAIROBIorlodgedattheCompany’sregisteredofficeatMumiasnotlaterthan11.00a.monMonday30thNovember2012.

3. InaccordancewithArticle155oftheCompany’sArticlesofAssociation,acopyoftheentireAnnualReportandAccounts,acopyofthisnoticeandproxyformmaybeviewedonandobtainedfromtheCompany’swebsiteatwww.mumias-sugar.com.AnabridgedversionoftheBalanceSheet,IncomeStatement,StatementofChangeinEquityandCashflowStatementfortheyearended30thJune2012havebeenpublishedintwodailynewspaperswithnationwidecirculation.

Notice of the ANNuAl GeNerAl MeetiNG (AGM) 2013notiCe of tHe annual general Meeting (agM) 2013

NOTISI INATOLEWA HAPA KWAMBAmkutanowa42wapamojawamwakawakampuniutafanyikakatikachuochaTomMboyaLabourIjumaaDesemba6,2013kuanziasaanneasubuhiilikuangaziamaswalayafuatayokibiashara:

1) Kusomanotisiyakuitishwakwamkutano

2) Kuthibitishakumbukumbuzamkutanowa41wamwakauliofanyikaDesemba7,2012.

3) Kupokea,kuangazianaendapoitathibitishwakupitishataarifazamatumiziyapesakwakipindichamwakauliomalizikaJuni30,2013pamojanaripotizawakurugenzinawakaguziwapesa

4) Kuwachaguawakurugenzi:

a)Bw.SakwaBunyasialijizulukutokahalmashauriwakatiwakipindichamwakanakusababishakuwepokwapengokatikaHalmashauri.Chiniyakifungunambari95chakitengochaAkwenyeawamuyakwanzayasheriazakampuninasehemuya114yasheriazamakampuni,wakurugenziwanauwezokumteuamkurugenzikujazanafasiiliyowazikatikahalmashauriyawakurugenzi.Wakatiwakipindichamwaka,Bw.DanAmeyoaliteuliwakamaMkurugenziilikujazanafasiiliyoachwawazibaadayakuondokakwaBw.SakwaBunyasi.Wanahisawa‑taidhinishakuteuliwakwaBw.DanAmeyokamaMkurugenzi.

b)Mabw.EdwinsMukabana,JohnBosse,BiSarahSeremnaBw.HenryK.Rotich(Katibuwawizarayafedha)wanatarajiwakustaafukwazamukwamujibuwakifungunambari113chasheriazamakampuni.Wanahisawatawachaguawakurugenziilikujazanafasihizi

5) KupitishamalipoyawakurugenzikwakipindichamwakauliomalizikaJuni30,2013

6) Kutambuakwamba,kwakuwahaliinawaruhusu,wakaguziwapesaDelloitte&Touchewataendeleambelenajukumulaokwamujibuwasehemuya159(2)yasheriazamakampuni(kifungunambari486)nakuwaamuruwakurugenzikuamuamalipoyao.

7)Shughulinyingineambazonotisiyakeitakuwaimetolewanakupokelewakwamudaunaofaa.

KWA AMRI YA HALMASHAURI

E K OTIENOKatibu wa Kampuni

ImenukuliwaSeptemba2,2013

Muhimu:

1) Mwanachamayeyotekupitianotisialiyotiasahihiyeyemwenyewenakuwasilishwakwakatibukablayasiku3lakinizisizidi21kablayakufanyikakwamkutanowapamojawamwakaanawezakutoanotisikuonyeshaniayakeyakumpendekezamtuyeyotekuchaguliwakamaMkurugenzikwenyeHalmashauri.Notisikamahiiiambatanenasahihiiliyotiwanamtualiyependekezwakudhihirishaniayakekutakakuchaguliwa.

2) Mwanachamaaliyenauwezokufikakwenyemkutanonakupigakuralakiniakawahawezikufanyahivyo,anaruhusakumteuawakalawakekuhudhurianakupigakurakwaniabayake.Si lazimakwawakalahuyokuwamwanachamawakampuni.Fomuyawakalainawezakupatikanakupitiawavutiwakampuniauwasajiliwahisazakampuni.Ilikukubaliwa,fomuyawakalalazimaiweimejazwakikamilifunakutiwasahihinamwanachamanalazimaiwasilishwekatikaofisizamsajiliwahisazakampuni, ImageRegistrarsandCertifiedPublicSecretaries,orofayananeJumbalaTransNationalPlazaBarabarayaMamaNgina,Slp9287-00200GPONAIROBIauiwasilishwekatikaofisizakampuni,MumiaskablayasaatanoasubuhisikuyaJumatatuNovemba30,2013.

3) Kwamujibuwakifungunambari155chasheriazakampuni,nakalanzimayaripotiyamwakanamatumiziyapesapamojananotisihiinafomuyawakalazinawezakupatikanakupitiawavutiwakampuniambaoni:www.mumias-sugar.com.Muhtasariwamizania,taarifazamapatonamabadilikoyahisanamtiririkowapesakwakipindichamwakauliomalizikaJuni30,2013zimechapishwakupitiamagazetimawiliyakilasikuyanayosomwakwawingikotenchini.

Notisi ya MkutaNo wa PaMoja wa Mwaka (agM) 2013notisi Ya Mkutano wa PaMoja wa Mwaka (agM) 2013

MR. FRANCIS KIPKOECH ARAP KIGEN (68)

Mr. Kigen is a graduate of University of Nairobi where he obtained a BA (Hons) degree before proceeding for a Master of Education degree at the University of Malaysia, Kuala Lumpur in Malaysia. He has previously served as a director of Kenya Bureau of Standards, as alternate director at Esso Kenya Limited. He has held managerial positions having worked as Human Resources/Public Affairs Manager at Esso Kenya Limited, as Training Manager at British American Insurance Company and as Director of Kenya Institute of Personnel Management.

10

MR. DAN AMEYO

Mr. Ameyo holds aBachelor of Laws (LL.B) (Hons) Degree from the University of Nairobi, a Master of Laws (LL.M) from Queen Mary, University of London. He is a practising advocate and legal consultant on trade and integration law in Kenya and within the East African Community and COMESA region. He is an advocate of the High Court of Kenya, a member of the Law Society of Kenya (LSK), a member of the Institute of Certified Public Secretaries of Kenya (ICPSK) and a Fellow of the Chartered Institute of Arbitrators in London.He previously worked as a State Counsel in the Attorney General’s chambers where he served as an Alternate Director to the Attorney General on various Boards including Kenya Airways and Capital Markets Authority. He also worked as the Post Master General and CEO of Postal Corporation of Kenya. He is currently a non-executive Chairman of the Board of Directors of Equatorial Commercial Bank.

MRS. ESTHER KOIMET (56)

Mrs. Koimett is the alternate to Mr. Henry K. Rotich, the Cabinet Secretary for National Treasury. She is a holder of an MBA and Bachelor of Commerce degrees from the University of Nairobi. She has held various senior positions in government and the parastatal sector. She has been a Permanent Secretary, Ministry of Tourism and Information as well as the Managing Director of Postbank. She is currently the Investment Secretary, Ministry of Finance.

MRS. SARAH JEPKEMBOI CHUMO SEREM (54)

Mrs. Serem holds a Bachelor of Arts (Sociology and Political Science) and a Masters of Business Administration from the University of Nairobi. She is a member of the Institute of Human Resource Management of Kenya and has over 28 years experience in HRM practice and other management undertakings. She is the managing director of YoungBiz, a multinational trading company that specializes in entrepreneurship business and financial literacy education. She is currently the Chairperson of the Salaries and Remuneration Commission.

MR JOHN BOSSE (66)

Mr. Bosse is the Chairman of the Board and is an Associate of the Chartered Institute of Bankers (ACIB-UK). He has had a long banking career with Kenya Commercial Bank where he rose to be the Chief Operating Officer of Kenya Commercial Finance Corporation. He also served as Chief Executive of Development Bank of Kenya for over 17 years before his retirement.

MR. PETER KEBATI (49)

Peter Kebati is Managing Director and Chief Executive Officer of the Company. He is a holder of a Bachelor of Commerce – Accounting option degree from the University of Nairobi. He is also a Certified Public Accountant and Certified Credit Professional and a member of the Institute of Certified Public Accountants of Kenya (ICPAK). Previously, he worked as the Head of Audit before being elevated to the position of Finance Director and ultimately Managing Director. He had earlier worked with Price Waterhouse and Standard Chartered Bank in Audit & Credit Management.

MR. HENRY K. ROTICH

Mr. Henry K. Rotich is the Cabinet Secretary for National Treasury. Prior to his appointment, Rotich was the Head of Macroeconomics at the Treasury, Ministry of Finance, since March 2006. Prior to joining the Ministry of Finance, Mr. Rotich worked at the Research Department of the Central Bank of Kenya since 1994. Between, 2001-2004, he was attached to the International Monetary Fund (IMF) local office in Nairobi to work as an economist. Mr. Rotich has previously served as a Director on several Boards of State Corporations, including: Insurance Regulatory Board; Industrial Development Bank; Communication Commission of Kenya; and Kenya National Bureau of Statistics. Mr. Rotich holds a Master’s Degree in Public Administration (MPA) from the Harvard Kennedy School, Harvard University. He also holds Master’s Degree in Economics and a Bachelor’s Degree in Economics (First Class Honours), both from University of Nairobi.

Cs – National Treasury)

1111

MR. JAMES CHEGE (60)

Mr. Chege is an Accountant by profession with a Bachelor of Commerce degree from the University of Nairobi and an MBA from Cornell University, Ithaca USA. Prior to becoming the Head of Corporate Banking at Kenya Commercial Bank, Mr. Chege worked as the Managing Director of KCFC which is a wholly owned subsidiary of KCB. He is currently engaged in private business.

MRS. EMILY K OTIENO (44)

Mrs. Otieno is the Company Secretary and the Secretary to the Board. She holds an LLB Degree from the University of Nairobi, a Post graduate Diploma in Legal studies from the Kenya School of Law and an Executive Diploma in Corporate Governance from Kenya College of Accountancy (KCA) University. She is a Certified Public Secretary of Kenya and an advocate of the High court of Kenya. She is currently pursuing MBA studies with the University of Nairobi. She has wide experience in corporate law practice having been an in house counsel for a long period of time. She is a member of the Institute of Certified Public Secretaries of Kenya (ICPSK) and the Law Society of Kenya (LSK) in good standing. She is also a member of the Institute of Directors, Kenya.

MR. MUKABANAH EDWINS MASSIMBA (56)

Mr. Mukabana has a Master of Science in Transport Planning and Management from Westminster (UK) and a Bachelor of Arts in Political Science. He is currently the Managing Director of the Kenya Bus Services Management Ltd and President of Bus Operators Commission at Union of Africa Public Transport (UATP). Mr Mukabana is also a Managing Consultant with Transport Links Ltd, a firm that advises on transport restructuring.

MRS. NANCY KAMINCHIA

Mrs Kaminchia holds a Bachelor of Science in Agriculture from University of Nairobi, Master of Science in Crop Production from Bath – UK. Currently Mrs. Kaminchia is a consultant and non-Executive Director of Middle East Bank (Kenya) and a Trustee of Mbegu Trust, a non-profit organization. She is also a member of Institute of Directors, Kenya Chapter, Registered with National Environmental Management Authority as a lead Expert, Founder member Kenya Professional Association of Women in Agriculture and Environment (KEPAWAE) and Parklands Sports Club.

MR. COUTTS OTOLO

Mr. Otolo is a Certified Public Accountant and Financial & Management Consultant. He holds a Bachelor of Commerce (Honours) degree from University of Nairobi. He is licensed to practice in UK, Kenya, Uganda and Rwanda as a Certified Public Accountant. Mr. Otolo is currently the Chief Executive Officer; Crowe Horwath EA, a firm of Certified Public Accountants, having previously worked as the Chief Executive Officer and Regional Head of Advisory Services at Ernst & Young; Eastern Africa. He is a Fellow of the UK Chartered Association of Certified Accountants (FCCA), Member of the Institute of Certified Public Accountants of Kenya (ICPAK) and former member of Governing Council, Member of the Institute of Certified Public Accountants of Uganda (ICPAU) and Member of the Institute of Certified Public Accountants of Rwanda (ICPAR)

MR. JAMES OPINDI

Mr. Opindi holds Bsc. Mechanical Engineering degree from University of Nairobi. Currently he is the General Manager, Weld Com Limited Mombasa. He has a wealth of experience in Health and Safety issues from diverse jurisdictions.

NIMRODE NAMENGE

Mr. Namenge holds a M.A. Economics & Business from Samuel J. Silverman College of Administration in U.S.A. He worked as a career civil servant in various capacities mainly in vadministration. He is currently a farmer of coffee and food crops.

Chairman



Our Shareholders;

On behalf of the Board of Directors and

Management of the Company, I wish to

present to you the Annual Report on the

business and operations of the Company

and financial results for the year ended

30th June, 2013. Unlike the previous

years, the results for this yeararenegative

duetovariousfactors.Iurgeyouesteemed

Shareholders to receive the results

objectively. The Board is working with

Management in order to ensure that the

Companycomesbacktoprofitability.

Operations

Thecompanyprocessed1,719,920tonnes

of cane compared to 1,917,340 in 2012

representing a 10.3% drop in volumes of

cane. Thiswasmainlydue toadecline in

cane supply this year as explained in the

ManagingDirector’sReport.

In the period, the company produced

147,320 tonnes of sugar compared to

172,614in2012whichwas15%belowthe

levelofproductioninthepreviousfinancial

year. The factory efficiency was lower due

tolowercapacityutilisationarisingfromlow

supply of cane and hence less sugar was

recovered.

Revenue

Gross turnover was Kshs 14,936 million

compared to Kshs 18,703 million 2012

which was 20% below the level achieved

thepreviousyear.Theglobalandregional

sugar supply increased resulting in much

lower selling prices which further dipped

turnoverwhencoupledwithlowproduction.

A lotof illegal cheap sugar imports found

their way into the Kenyan market thereby

depressingsugarpricesfurther.

The sale of power from co-generation

plant generated a net revenue of Kshs 305

million compared to Kshs 435 million in

2012.Thiswasadecreaseof29.9%and

was attributed to low availability of cane

from which the bagasse used as fuel is

generated.TheCompanyhassourced for

bagasse from neighbouringmillers where

possible in order to sustain both the co

generation and the ethanol boilers which

usebagassetofiretheboilers.

John V BosseChairman

Chairman’s statementCHairMan’s stateMent

TheCompanysold4millionlitresofethanol

and earned Kshs 331 million in revenue

comparedtoKshs1.5million in2012.The

ethanol plant has now stabilised and full

commercialoperationsarenowinprogress.

TheCompany sold 951,000 litres of water

andearnedKshs28millioninrevenue.The

plantwasstillundergoingsomeproduct re-

designs hence full commercial operations

hadnot yetcommencedat thecloseof the

financialyear.

Contribution to Government revenue

TheCompany continues to be oneof the

biggest contributors to the government

exchequer in taxes fromValueAddedTax

(VAT), Sugar Development Levy (SDL),

Excisedutyandothertaxes.Inthefinancial

yeartheCompanypaidKshs3.0billionto

theGovernment in VAT, SDL, Excise duty

and other taxes compared to Kshs 3.2

billionin2012.

Dividends

Due to the poor performance in the period

underreview,theDirectorsdonotproposethe

paymentofadividend.

Future outlook

Mumias Sugar Company is still a strong

company. We are making every effort to

address the current challengeof cane supply

throughvariousprograms.Withsufficientcane

supply,itisexpectedthatallthecurrentplants

i.esugar,co-generationandethanolwillrunas

expectedhenceproductdiversificationwill be

akeygrowthdriverasotheropportunitiesare

beingexplored.

TheBoardofDirectorswill continually review

thevariousbusinessstrategiesinplacetoensure

sustainedbusinessprofitabilityandgrowth.The

Board is cautiouslyoptimisticofa satisfactory

performanceinthecomingfinancialyear.

Thankyou.

John V Bosse

Chairman

Chairman’s statement (Cont’d) CHairMan’s stateMent (Cont’d)



Ripoti ya MwenyekitiriPoti Ya MwenYekiti

Kwawanahisawetu;

KwaniabayaHalmashauri yawakurugenzi

wasimamizi wa Kampuni, ningependa

kuwaletearipotiyamwakakuhusubiashara

nashughulizaKampuninapiamatokeoya

kifedhakwakipindichamwakauliokamilika

Juni 30, 2013. Tofauti na miaka iliyopita,

matokeoyamwakahuusiomazurikutokana

na sababu mbalimbali. Nawaomba

wanahisawetuwapendwakupokeamatokeo

haya kama yalivyo. Halmashauri inafanya

kazi na usimamizi kuhakikisha kwamba

Kampuniimerejeleakiwangochaupatikanaji

wafaida.

Matokeo ya kifedha

Kampuni ilisaga tani1,712,920 zamiwa

ikilinganishwana tani 1,917,340mwaka

2012na kuwakilishaupungufuwaasilimia

10.3(10.3%)waviwangovyamiwa.Halihii

ilitokanahasanaupungufuwauwasilishaji

miwa mwaka huu kama ilivyofafanuliwa

kupitiaripotiyaMenejaMkurugenzi.

Wakatiwakipindihiki,kampuniilizalishatani

147, 320 za sukari ikilinganishwa na tani

172,614mwaka2012kiwangokilichoshuka

kwa asilimia 15 (15%) ikilinganishwa na

kipindichamwakauliopitawamatumiziya

pesa. Utekelezaji kazi wa kiwanda ulikuwa

wa chini kutokana na matumizi yake

kushuka hali iliyosababishwa na kushuka

kwa viwango vya miwa iliyowasilishwa na

kupelekeauzalishajiduniwasukari.

Mapato

Mapatokwa jumlayalikuwaShilingimilioni

14,936ikilinganishwanashilingimilioni18,

703mwaka2012kiasiambachokilipungua

kwaasilimia20 (20%) dhidi yamapato ya

mwaka uliotangulia. Usambazaji wa sukari

duni uliongezeka na kupelekea kupungua

kwabeizamauzohaliiliyochangiwazaidina

uzalishajiduni.Sukarinyingiya thamaniya

chiniiliingizwakatikasokolahumunchinina

kuzoroteshazaidibeizasukari.

Mauzoyakawikutokakiwandachapamoja

yalizalishajumlayaksh.milioni305baada

ya kutozwa ushuru ikilinganishwa na Ksh.

milioni 435 mwaka 2012. Hii ilipungua

kwa asilimia 29.9 (29.9%). Upungufu huu

ulisababishwa na kiwango cha chini cha

miwaambayomabakiyakehutumiwakama

mafuta.

Kampuni imeagizamabaki yamiwakutoka

viwanda vilivyo karibu panapohitajika ili

kudumishamitamboyotemiwiliyauzalishaji

wa kawi na moto unaotumiwa kuchemsha

mapipa yanayotengeza kemikali aina ya

ethanol.

Kampuni iliuza lita milioni 4 za ethanol

na kujipatia mapato ya Ksh. Milioni 331

ikilinganishwa na Ksh. Milioni 1.5 mwaka

2012. Kwa sasa, kiwanda cha ethanol

kimekuwa thabiti na shughuli kamili za

kibiasharazinaendelea.

John V BosseMwenyekiti

Ripoti ya Mwenyekiti (kuendelea)riPoti Ya MwenYekiti (kuendelea)

Kampuni iliuza lita 951,000 za maji na

kujipatiamapatoyaKsh.Milioni28.Kiwanda

hikichamajikilikuwakikifanyiwausanifuwa

bidhaanakwasababuhiyoshughulikamili

za kiuchumi hazikuwa zimeanza kufikia

mwishowakipindihikichamatumiziyapesa.

MCHANgO KWA HAZINA YA

SERIKALI

Kampuni inaendelea kuwa mchangiaji

mkuu kwenye mfuko wa hazina ya serikali

kupitia ushuru wa ziada (VAT), ushuru kwa

maendeleoyakilimochamiwa(SDL),mapato

ya ushuru na ushurumwingine.Wakati wa

kipindihiki chamatumizi yapesa,kampuni

ilitoamalipoyaKshs.bilioni3.0kwaserikali

kamaushuruwaziada(VAT),SDL,ushuruwa

mapato na ushurumwingine ikilinganishwa

naKsh.bilioni3.2mwaka2012.

Mgao wa faida

Kutokananamatokeoduniwakatiwakipindi

cha mwaka unaongaziwa, Wakurugenzi

hawapendekezikutolewakwamalipoyoyote

yamgaowafaida.

Mtazamo wa siku za usoni

KampuniyasukariyaMumiasingalithabiti.

Tunafanya juhudi zote kushughulikia

changamotozilizokosasazaupatikanajiwa

miwa kupitia mipango mbalimbali. Huku

tukiwanamiwayakutosha,inatarajiwakuwa

viwanda vilivyoko kwa sasa, kwa mfano

mtambowapamojawauzalishajiwaethanol

zitahudumu kama inavyotarajiwa. Kwa

sababu hiyo,upanuzi wa bidhaa utakuwa

kigezomuhimuhukunafasinyinginezikizidi

kuvumbuliwa.

Halmashauri ya wakurugenzi itazidi

kutathmini mikakati mbalimbali ya

kibiashara iliyoko ili kuhakikishauwepowa

faida zakibiasharanaukuaji.Halmashauri

ina matumaini makubwa ya kuwepo kwa

matokeo ya kuridhisha wakati wa kipindi

kijachochamatumiziyapesa.

Asanteni

John V. Bosse

Mwenyekiti.



ManageMent teaMManageMent teaM

MR PETER KEBATIManaging Director

MR JOSEPHET ASIRAAg. Director of Factory Operations

MR CHRIS CHEPKOITFinance Director

MRS PAMELA LUTTADirector of Marketing & Corporate Affairs

MRS. MARGARET MAKHUNGU-MUKOBAAg. Director of Information & Communication Technology

MR STEPHEN OLIEKADirector of Human Resources

MR PAUL MURGORCommercial Director

MRS EMILY K OTIENOCompany Secretary & Director of Legal Affairs

MR WESLEY KOECHAg. Director of Agriculture

Our Shareholders and Investors

On behalf of Management, allow me to

presentthisReportontheoperationsofthe

Company during the period under review.

Our Company’s performance declined

compared to previous periods due to the

emergingchallengesintheindustry.Despite

the challenges, the Management team is

determined to reverse this position and

bring the Company back to the desired

profitabilitylevels.

Financial Performance

ThetotalturnoverfortheyearwasKshs11.2

billionforsugar,Kshs458millionforenergy

and Kshs 261 million for ethanol. The

turnoverwasmainlydepressedbylowcane

supplywithlowerqualityandpol(sucrose),

lowrendementoccasionedbylowrecovery

rate, and low sugar prices in themarket.

The gross profit was Kshs 1.5 billion with

anet lossbefore taxof (Kshs2.2billion)

comparedtoKshs1.7billionprofitin2012

Agricultural Operations

Thecanezonereceivedameanof1907.9

mmrainfallagainstalongtermmean(LTM)

of1846.9mmwhichwasaboveLTM.Cane

supplied to the factory was 1,706,927.4

tonnes. This was below target due to

depressed cane volumes and wet weather

thathamperedcanetransportation.Atotal

of 126,509 tonnes was received from the

NE, 1,423,054 tonnes from the OG, 102

tonnes from Nzoia, 151,375 tonnes as

privatecane,and5,887.4tonnesdelivered

asothercane.

CombinedcaneyieldsforbothNEand

OGstoodat47.1TCHlargelydueto

harvestingof relativelyyoungercane

andancientratoons.

Pol % (sucrose in cane) was 10.74

against budget of 12.44 while

extraneousmatterwas2.78%against

budgetof3.00%andstalenessstood

at 1.87 days against budget of 2.00

days. Total ha burnt down in the

financial year was 586.68 ha. An

estimated 150,000 tonnes of cane

were poached by neighboring mills

especiallyWestKenya.Canepoaching

has become the major challenge to

ouroperationsasitaffectscanesupplythus

distortingprojections.

Atotalof9,156.1hawereploughedagainst

the budgeted13,000 ha. Area harrowed

and furrowed was also below budget.

A total of 8,382.63 ha and 8,354.65

were harrowed and furrowed respectively

againstabudgetof13,000ha.Anareaof

8,771.61 hawas planted while a total of

62,997.56tonsofseedcaneweresupplied

totheoutgrowers.

FarmertrainingandEducationwascarried

out extensively throughout the scheme for

thepurposeofenhancingfarmers’skillsand

knowledgeonsugarcaneproduction.

A total of 2,178.78 km road works were

done against a budget of 2500 km. This

was in an effort tomake the roads in the

canezonespassableinordertoaccesscane

inthefields.

Factory Performance

Inadequate and poor quality of cane

affected factory operations. During the

period under review, two out of crop

(OOC) maintenances of the factory plant

were undertaken, one in July 2012 and

the other in May 2013 during the wet

period. Production of branded sugarwas

maintainedat30%ofthetotalproduction.

Total sugar production for the financial

period was 147,308 tons which was

(102,708) tons (41%) below budget and

(25,306) tons (15%) below the previous

year.Rendement for theperiodwasbelow

budget by 2.00 points. Ethanol and

electricity production continued save for

thechallengesassociatedwithrawmaterial

supply

Sales and Commercial activities

Globalmarketofsugarwasunstableduring

the year.Theprices remainedvolatileand

sugar futures market output increased by

4.0 million tonnes to a record of 181.4

Managing Director’s stateMentManaging direCtor’s stateMent

Peter KebatiManaging Director




million tonnes thus a surplus of 6.3 mln

tones for the 2012/13 period. Regionally,

Egypt production declined due to the

politicalinstabilityinthecountry.

During the period a total of 140,775

tonnesofsugarwassoldagainstabudget

of176,000tonnes.Brandedsalesstoodat

29.0%ofthetotalsalesagainstatargetof

50%.Lowsaleswereexperiencedduringthe

periodasaresultoflowproduction.There

wasevidenthighdemandforsugarduring

theperiodandasaresult,competitorsboth

from local and imported dominated the

market.

An average net selling price of Kshs

78,540/=wasachievedagainstabudget

of Kshs 80,000 per tonne compared to

Kshs 106,742/= in the previous period.

Duringthefirsthalfoftheperiodpriceswere

unstableduetocheapimportsinthemarket

from within the region especially Uganda

andTanzania.

Most companies have increased their

brandinglevelsasawayofgeneratingmore

revenue due to better margins. However

there are shifts towards in-house branding

bymost key supermarkets thus threatening

the shelf space for major brands like

Mumiassugar. Importershavealsostarted

torebrandbulksugarasamarketstrategy

thusintensifingcompetition.

Duringthefinancialyearimportsincreased

toanall-timehighbothfromCOMESAand

otherregions.KRAimposedcashbondson

sugar imports from Tanzania andUganda

did not affect the influx of the sugar from

thetwocountriesduetonontraditionalentry

pointslikeLoitoktok,KwaleandLiboi.Most

COMESAcountrieswhotraditionallyexport

toKenyastillhavetheirstockscommittedto

EuropeanUnionuntilearly2014.

The Company did import 10,000mt from

within COMESA in the 2nd half of the

periodtocurbthedeficitontargetandtake

advantage during maintenance period.

However the consignmentwas delayedon

docking.

Atotalof951,000litresofwaterwassold

during the period against a target of 6

million litres. The poor performance was

duetothefact that theproductwasstillat

theintroductorystages.

Atotalof4millionlitresofethanolweresold

againsta targetof6million litres.Ethanol

production was affected by technical

problems in the production coupled with

KRAdelayinapprovalofcustomers.

Marketing and Corporate Affairs

Marketingactivitiesweresustainedalbetat

a low level as part of controlling costs. In

ordertoalignproductdeliverytoconsumer

needs, a Research was carried out to

gauge consumer behaviours focusing on

sugar brand health, market trends/market

shareanalysisconsumerbehaviourinterms

of needs, usage, beliefs, perceptions and

awareness and consumption levels of all

brands

Managing Director’s stateMent (cont’D)Managing direCtor’s stateMent (Cont’d)

RedesignoftheMumiasSprinklesbottlewas

undertaken and completed. This was as a

response to consumer and trade feedback

onthebranding,labelingandpackagingof

waterbrand.Theredesignprocesswasalso

partofeffortstodealwithnotedchallenges

of 1 litre bottle during warehousing and

distribution, production costs, pricing and

marginsonthewaterbusinessline.

The company continued to utilize various

avenues to sustain communication and

information flow to various stakeholders.

The channels included briefings quarterly

publications for the employees and Sukari

Quarterlyforfarmers,theelectronicboards,

intranetandtheWebsite.

The Company established the Mumias

Sugar Foundation to undertake corporate

social investment activities. The framework

for the efficient and effective delivery of

the Mumias Sugar Foundation mandate

was completed and approved by the

Trustees of the Foundation. The following

corporatesocialresponsibilityactivitieswere

undertakenduringtheperiodunderreview;

Education

Donationof1classroomper11schoolsin

the 10 Zones ithin theMSC cane scheme

(Shimuli ECD,Mumias township, St Johns

Mukhweya, Mukhuma Sec, Luliba Pri,

Opedur Pri, Eshitari Pri, Madende Pri,

MulukobaPri,IgaraSec,EsumeiyaPri)

Health

EyeCamps (MumiasTown,BuchenyaPri,

Nambale Pri, Makunga market, Bumula

Pri).MSC in collaboration with RedCross

carried out a jigger eradication exercise

in Bumula zone (420 attended) Bulimbo

Primary School where 800 people were

attendedto.TheCompanysupportedother

health initiatives including Mater Heart

Runwhere Kshs 2.9millionwas raised by

employees, Booker school and the larger

MumiasCommunity

Entrepreneurship

MSCorganisedcommunitybasedmeetings

in all zones to assess and evaluate the

existing Community Based Organizations

network on the ground as part of setting

up structured groups to be engaged in

entrepreneur and income generating

activitiesforthe2013/14period.

Environment

TheCompanycontributedandparticipated

in county clean-ups for Mumias and

Bungomacounties.TheCompanydonated

clean up equipment and also employees

participated in the exercise. A total of

105,000 tree seedlings were donated to

thecommunitytargetingmainlyfarmersand

schools.

CorporateReputationManagement

Corporate reputation management was a

bigchallengegiventheincreasedfocuson

theCompany.Engagementwithkeymedia

housesandstakeholderswasemployedfor

objective reporting about the Company

in press and also to minimize negative

publicity.

Human Capital Investment

The Company continues to invest in

skilled human capital as an asset for the

organization

In line with the company’s objective of

digitizing records, personal files for all

employees were digitized. Employee

performance remained the focus through

theemployeeperformanceprograms.

The relationship between management

and the Union remained harmonious with

the usual consultations on the Collective

Bargaining Agreement (CBA) and welfare

matters. Discipline across the Company

continued to improve with various

consultationswherenecessary.

TheCompanymade some changes in the

top Management team as follows;

(i) Mr.ChrisChepkoitKisirewhowasthe

FinanceDirectorresignedandhisplace

wastakenoverbyMr.GodfreyOuma,

previously the Treasury Accountant

awaiting the substantive filling of the

Managing Director’s stateMent (cont’D)Managing direCtor’s stateMent (Cont’d)



position. The position has since been

filled following interviews conducted

by the Board Human Resources and

StrategyCommittee.

(ii) Mr. Jonah Omuyoma, previously the

Director of Factory Operations took

an early retirement. His position was

filledmyMr. Josephat Asira who was

previouslytheChiefElectricalEngineer.

(iii) Mr. Moses Daniel Nyongesa who

was theDirectorofAgriculture left the

Company. His position was taken by

Mr.WesleyKoech,theDirectorof ICT

inaholdingposition.TheBoardHuman

ResourcesandStrategyCommitteeisin

the process of identifying a candidate

to fill the position substantively. Mr.

Koech’s position was taken by Mrs.

Margaret Makhungu, previously

the Infrastructure and Development

Manageronaholdingposition.

(iv) Mr. Thomas Okello Ochieng’ was

appointed as the Corporate Quality

Assurance Manager to deal with

matters of quality of products and

servicesacrosstheentirevaluechain.

As part of improvement of the corporate

imagefortheCompany,constructionofthe

newMSCOfficeblockandtheFarmerCare

Centrewas completed and the building is

nowinthefinalstageoffixturesandfittings

priortooccupancy.

Litigation, dispute resolution and

compliance with laws.

During the period, a detailed legal audit

was undertaken on the operations of the

Companyinordertogaugethecompliance

levels and risk exposure for proactive

action. The accounting dispute between

MSC and Mumias Outgrowers Company

is stillpendingwhilevariouscaseswereat

differentstagesofhearing.

Information and Communication

Technology

During the period under review, various

projects/initiatives were completed

including implementation of a farmers

service management system and farmer

hotline mini call centre, interfacing of

Agriculture Management System (AMS)

and Laboratory Information Management

System (LIMS) amongst others. Other

businessprocessinitiativescompletedwere:

automation of seed caneweighing by use

ofPersonalDigitalAssistantdevices (PDA),

implementation of Vehicle Identification

System (VIS) and use of smartcards and

PDAsinmillcaneandseedcanetransport.

Safety, Health and Environment

Safety, health and environment remain

key focus areas for the company and are

monitored on a continuous basis. During

theperiodunderreview,sufficientresources

weredeployedinthisareainordertoensure

compliance with statutory requirements.

Because of the mitigating measures

undertaken by the Company, the number

of workplace injuries and safety breaches

hasbeenreduceddrastically.Wecontinue

to undertake proactivemeasures through

regularauditsofouroperations.

CONCLUSION AND FUTURE

OUTLOOK

The company has developed a Strategic

Planfor theperiod2012-2017.Theareas

of focus will be consolidating on our

productionplants tomaximizeproductivity,

improvement in service delivery to farmers

forbetteryields,productdiversificationand

brand equity building, develop a robust

enterprise risk management system and

ensure thatwe have the human capital to

growthebusiness.

ThankyouandmayGodblessyou.

PETER KEBATI

Managing Director

Managing Director’s Statement (cont’d)Managing direCtor’s stateMent (Cont’d) Ripoti ya Meneja MkuRugenziriPoti Ya Meneja Mkurugenzi

Wanahisawetunawawekezaji

Kwa niaba ya usimamizi, naomba fursa

hii kuwaletea ripoti kuhusu shughuli

za Kampuni kwa kipindi cha mwaka

unaoangaziwa. Matokeo ya Kampuni

yetu yalipungua ikilinganishwa na vipindi

vilivyopita kutokananachangamoto ibuka

kwenyesektahii.Lichayachangamotohizi,

timu ya usimamizi imejitolea kubadilisha

halihiinakuirejeshaKampunikatikahaliya

kupataviwangovyafaidavinavyoratajiwa.

MATOKEO YA KIFEDHA

Mapato jumla ya mwaka mwaka huu

yalikuwa Ksh bilioni 11.2 kwa sukari, Ksh

bilioni458kwasektayakawinaKshbilioni

261kwauzalishajiwakemikaliyaethanol.

Mapato haya yalipungua kutokana na

viwangovyachinivyamiwailiyowasilishwa

ikiwa na viwango duni vya pol (Sukari

ya muwa), kupungua kwa mapato

kukiandamana na ulipaji duni wamadeni

na bei duni za sukari katika soko. Faida

ya jumla ilikuwaKshbilioni1.5nahasara

halisikablayakutozwaushuruikiwaniKsh.

bilioni2.2 ikilinganishwana faida ya

Kshbilioni1.7mwaka2012.

SHUgHULI ZA KILIMO

Kanda ya miwa ilipokea kiwango

cha wastani cha mvua ya milimeta

1907.9 dhidi ya kiwango cha muda

mrefuchawastani(LTM)chamilimeta

1846.9 ambacho kilikuwa cha

juu cha LTM. Miwa iliyowasilishwa

kiwandani ilikuwa tani1,706,927.4.

Kiwangohiki kilikuwachachinidhidi

ya malengo yaliyotarajiwa kutokana

na viwango hafifu vya miwa na hali

ya unyevu iliyoathiri usafirishaji wa

miwa.Jumlayatani126,509zamiwa

zilipokelewa kutoka NE, tani 1,423, 054

kutoka OG, tani 102 kutoka Nzoia, tani

151,375 kama miwa ya kibinafsi na tani

5,887 kutokamaeneomengine.Mazao ya

miwakwajumlakutokaNEnaOGyalikuwa

47.1 TCH kutokana na uvunaji wa miwa

changanainayoota.

Kiwango cha POL kwa asilimia (sukari

kwenyemiwa)kilikuwa10.74dhidiyabajeti

ya12.44hukuhewakutokanjeikiwa2.78

dhidiyabajetiyaasilimia3.00nauchachu

ukisimamiasiku1.87dhidiyamalengoya

siku2.00.Jumlayaekari586.68zamiwa

ziliteketeawakatiwakipindihikichamwaka

wamatumiziyapesa.Inakadiriwakwamba,

Jumla ya tani 150,000 za miwa ziliviziwa

naviwandaviliyokaribuhasaWestKenya.

Uviziaji wa miwa umekuwa changamoto

kubwa kwa shughuli zetu kwani unaathiri

viwango vya miwa inayopokelewa hivyo

kuvurugamakadirioyanayohitajika.

Jumla ya hekta 9,156.1 za mashamba

zililimwa dhidi ya bajeti ya hekta 13,000.

Eneo lililochimbwa mitaro na kutandazwa

pia lilikuwa la chini dhidi ya bajeti

iliyolengwa. Jumla ya hekta 8,382.63

na 8,353.65 zilichimbwa mitaro na

kutandazwa mtawalia dhidi ya bajeti ya

hekta13,000.Hekta8,777.61zilipandwa

miwa huku jumla ya tani 62,997.56 za

micheyamiwaikisambaziwawakulima.

Mafunzo na elimu kwa wakulima

zilitekelezwakikamilifukotekwamadhumuni

Peter KebatiMeneja Mkurugenzi



ya kuimarisha ufahamu kuhusu uzalishaji

wazaozamiwa.

Jumla ya kilomita 2, 178.78 za kazi ya

ujenzi wa barabara zilitekelezwa dhidi ya

bajetiyakilomita2,500.Hii ilikuwajuhudi

yakufanyabarabara zilizokokatikakanda

yamiwakupitikanakuwezeshakufikiamiwa

iliyokomashambani.

MATOKEO YA KIWANDA

Uhaba na thamani duni ya miwa ziliathiri

shughuli za kiwanda. Katika kipindi cha

mwaka unaongaziwa, ukarabati wa

kiwanda mara mbili ulitekelezwa mwezi

Julai 2012namwinginemweziMei2013

wakati wamsimu wamvua. Uzalishaji wa

sukari iliyotiwa alama ulidhibitiwa kwa

asilimia30(30%)yauzalishajikwajumla.

Uzalishaji wa jumla wa sukari kipindi hiki

chamwaka wamatumizi ya pesa ulikuwa

tani 147,308 kiasi ambacho kilikuwa ni

chachinikwatani102,708(asilimia41%)

chiniyabajetinatani25,306(15%)chini

ikilinganishwa na mwaka uliotangulia.

Malipokwakipindihikichamwakayalikuwa

chini ya bajeti kwa pointi 2.00. Uzalishaji

wa ethanol na umeme ziliendelea vyema

licha ya changamoto zilizoandamana na

upatikanajiwamalighafi.

MAUZO NA SHUgHULI ZA

KIBIASHARA

Bei za sukarikotedunianihazikuwa imara

wakati wa kipindi hiki cha mwaka. Bei

hizi ziliendelea kuwa hafifu na kugeuka

geuka huku hali ya soko la sukari siku za

usoni ikiongezeka kwa tanimilioni 4.0 na

kuandikisha rekodi ya tani milioni 181.4

hivyo kuwakilisha ongezeko la tanimilioni

6.3 kwa kipindi cha mwaka 2012/13.

Uzalishaji wa sukari katika taifa la Misri

ulipunguakutokananaukosefuwauthabiti

wakisiasanchinihumo.

Wakati wa kipindi hiki, jumla ya tani

140,775 za sukari ziliuzwa dhidi ya bajeti

ya tani 176,000. Sukari iliyo na nembo/

alamailikuwaasilimia29(29%)yajumlaya

mauzo yote dhidi yamatarajio ya asilimia

50 (50%).Mauzo ya chini yalishuhudiwa

wakatiwakipindihikikutokananauzalishaji

wa chini. Kulikuwa na hitajiko kubwa la

bidhaayasukariwakatiwakipindihikicha

mwaka na kwa sababu hiyo, ushindani

mkubwa ulishuhudiwa kutoka masoko ya

humunchininayasukariiliyoagizwakutoka

mataifayanje.

Kiwango cha wastani cha bei cha Ksh.

78,540 kiliafikiwa dhidi ya bajeti ya Kshs.

80,000kwakilataniikilinganishwanaKsh.

106,742kipindikilichotangulia.Wakatiwa

kipindi cha kwanza, bei hazikuwa imara

kutokana kuingizwa kwa bidhaa duni

kwenyesokohasakutokamataifayakanda

yaUgandanaTanzania.

Mataifa mengi yameongeza viwango vya

bidhaa zake kama njia mojawapo ya

kupanuamapatoyakekutokananaviwango

boravyafaida.Hatahivyo,kunamabadiliko

yauwekajinembo/alamakwenyemaduka

makubwa muhimu na hivyo kuhatarisha

nafasiyabidhaakubwakamavileMumias

Sugar. Waagizaji kutoka mataifa ya nje

piawameanza kuwekaalama yao kwenye

sukari ya kiwango kikubwa kamamkakati

mojawapo wa masoko hivyo kuendelea

kupanuaushindani.

Wakati wa kipindi hiki cha mwaka wa

matumizi ya pesa, bidhaa kutoka nje

ziliongezeka kipindi kizima kutokamataifa

Ripoti ya Meneja MkuRugenzi (kuendelea)riPoti Ya Meneja Mkurugenzi (kuendelea)

ya COMESA na maeneo mengine.

Halmashauriyaukusanyajimapatoilizindua

dhamana ya pesa taslimu kwa uagizaji

wa sukari kutoka mataifa ya Uganda na

Tanzania hali ambayo haikuathiri kuingia

kwawingi kwabidhaahii kutokamataifa

haya mawili kutokana na kuingizwa kwa

sukari kupitia vituo visivyo vya kawaida

kv. Loitoktok, Kwale na Liboi. Nchi nyingi

kutokamkatabawaCOMESAambayokwa

kawaidahuagizasukarikutokaKenyabado

zinaendeleakutegemeahifadhiyakekutoka

mataifayaUmojawaUlayahadimapema

mwaka2014.

Kampuniiliagizametrikitani10,000kutoka

mataifayaCOMESAwakatiwakipindicha

pilichamwakailikukabiliananaupungufu

dhidi ya malengo yaliyonuiwa na wakati

huo kutumia vyema kipindi chaukarabati.

Hatahivyo,shehenailikawiabandarini.

Jumla ya lita 951,000 za maji ziliuzwa

wakatiwakipindihikidhidiyamatarajioya

litamilioni6.Matokeohayaduniyalitokana

na hali kwamba bidhaa hii ingali katika

hatuazaawali.

Jumla ya litamilioni 4 za ethanol ziliuzwa

ikilinganishwa na kiwango kilichotarajiwa

cha lita milioni 6. Uzalishaji wa ethanol

uliathiriwa na matatizo ya kiufundi

kwenye uzalishaji na kuchangiwa zaidi na

ucheleweshajiwahalmashauriyaukusanyaji

mapato-KRAkuwaidhinishawateja.

UVUMISHAJI NA MASWALA YA

SHIRIKA

Shughuli za uvumishaji zilidhibitiwa kwa

kiwango cha chini kama njia moja ya

kukabiliana na gharama. Ili kuafikiana

na mahitaji ya wateja, zoezi la utafiti

lilitekelezwa ili kuangazia mienendo ya

wateja kuhusiana na afya ya bidhaa,

mabadiliko kwenye masoko/ tathmini ya

nafasikwenyemasoko,mienendoyawateja

kwamujibuwamahitaji,matumizi,dhana,

ufahamu na viwango vya matumizi ya

bidhaazote.

UbunifumpyawamajiyachupayaMumias

Sprinkles ulitekelezwa na kukamilika. Hii

ilitokana na majibu kutoka kwa wateja

na biashara kuhusiana na utangazaji kwa

kutumiamaandishinauhifadhiwabidhaa

yamaji.Hatuazaubunifuhuumpyazilikuwa

mojawapo wa juhudi za kukabiliana na

changamoto zilizopatikana kutokana

na maji ya lita moja wakati wa uhifadhi

kwenyeghalanausambazaji,gharamaza

uzalishaji, uwekaji bei na tofauti zilizoko

kwenyemipakayabiasharayamaji.

Kampuni iliendelea kutumia mbinu mbali

mbalikudumishamtiririkowamawasiliano

na habari kwa washika dau mbali mbali.

Mbinuhizizilihusishautoajiwamachapisho

ya habari kwa kila kipindi cha miezi

minne kwa wafanyakazi na jarida la kila

miezi minne kwa wakulima, mabango

yanayotumia umeme, mtandao wa ndani

kwandaninatovuti.

Kampuni ilianzisha wakfu wa Mumias

SugarFoundationilikutekelezashughuliza

uwekezajiwashirikakwajamii.Mfumowa

kuuwezesha wakfu huu kutekeleza wajibu

wake ipasavyoulikamilikanakuidhinishwa

nawadhaminiwawakfu.Shughulizifuatazo

zashirikakwajamiizilitekelezwawakatiwa

kipindihikikinachoangaziwa;

Elimu:

Msaada wa darasa moja kwa shule 11

katika zoni 10 zilizoko eneo la kilimo cha

miwa cha MSC (Shimuli ECD, Mumias

Township, St. JohnsMukhweya,Mukhuma

Sec, Luliba Pri, Opedur Pri, Eshitari Pri,

Madende Pri,Mulukoba Pri, Igara Sec na

EsumeiyaPri.)

Afya:

Kampizamacho(MumiasTown,Buchenya

Pri,NambalePri,MakunaMarket,Bumula

Pri). Kwa ushirikiano na Red Cross,

MSC ilitekeleza zoezi la kumaliza funza

huko Bumula (Watu 420 walihudhuria),

BulimboPrimarySchoolambapowatu800

walihudumiwa. Kampuni ilisaidia shughuli

nyingine za kiafya ikiwemo Mater Heart

Runambaposhilingimilioni2.9zilichangwa




kutokakwawafanyakazi,BookersSchoolna

jamiinzimayawakaziwaMumias.

Ujasiriamali (Uwekezaji):

Kampuni ya MSC iliandaa mikutano ya

kijamii katika zoni zote ili kuchunguza

na kutathmini mitandao ya mashirika ya

Kijamii yaliyoko nyanjani kama sehemu

moja ya kubuni makundi yenye muundo

bora yatakayohusishwa kwenye shughuli

zaujasiriamali(Uwekezaji)namapatokwa

kipindichamwaka2013/14.

Mazingira:

Kampuni ilitoa mchango na kushiriki

katika zoezi la usafi kaunti zaMumias na

Bungoma. Kampuni ilitoa mchango wa

kifaa cha usafi huku wafanyakazi wake

pia wakishiriki. Jumla ya miche 105,000

yamitiilitolewakwajamiinakulengahasa

wakulimanashule.

Usimamizi wa Sifa za Kampuni:

Usimamizi wa sifa za Kampuni ulikuwa

changamoto kubwa hasa ikizingatiwa

kuongezekakwamtazamowake.Uhusiano

namashirikamuhimuyavyombovyahabari

nawashikadauulianzishwa ilikutoaripoti

halisi kuhusu kampuni kupitia vyombo vya

habri na wakati huo kuthibiti utoaji ripoti

zisizohalisi.

Uwekezaji kwa wafanyakazi:

Kampuni inaendelea kuwekeza katika

taaluma ya wafanyakazi kama raslimali

ya shirika.Kwa mujibu wa malengo ya

kampuni ya kuweka rekodi zake kwenye

mfumowadigitali,failizotezawafanyakazi

zilinukuliwakwenyemfumohuu.Matokeoya

wafanyakaziyaliendeleakuangaziwakupitia

mipangoyamatokeoyawafanyakazi.

Uhusiano baina ya wasimamizi na shirika

linalowateteauliendeleakuwamzurikupitia

mashauriano ya kawaida kuhusumkataba

wa makubaliano (CBA) na maswala ya

kimaslahi. Nidhamu kwenye kampuni

iliendelea kuimarika kupitia mashauriano

mbalimbalipaleinapohitajika.

Kampuni ilifanya mabadiliko mbali mbali

kwenye timu ya juu ya usimamizi kama

ifuatavyo:

i) Bw. Chris Chepkoit Kisire aliyekuwa

Mkurugenzi wa Fedha alijiuzulu na

mahali pale kuchukuliwa na Bw.

GodfreyOumaambayeawalialikuwa

mhasibukatikaidarayafedhaakisubiri

kujaza kikamilifu nafasi. Kwa sasa

nafasi hii imejazwa kufuatia kufanyika

kwa mahojiano yaliyoendeshwa na

Halmashauri ya Idara ya kusimamia

wafanyakazinakamatiyamkakati.

ii) Bw. Jonah Omuyoma ambaye awali

alikuwa Mkurugenzi wa shughuli za

kiwanda alistaafu mapema na nafasi

yake kujazwa na Bw. Josephat Asira

ambaye awali alikuwamhasibuMkuu

waumeme.

iii) Bw. Moses Daniel Nyongesa ambaye

alikuwa Mkurugenzi wa Kilimo

alistaafu kutoka Kampuni na nafasi

yakekutwaaliwanaBw.WesleyKoech

ambayeniMkurugenziwakitengocha

habari na mawasiliano kama kaimu

msimamizi. Halmashauri ya Idara ya


kusimamia wafanyakazi na kamati

ya mkakati ziko kwenye harakati za

kumteua atakayesimamia kikamilifu

nafasi hii. Nafasi ya Bw. Koech

ilitwaaliwanaBi.MargaretMakhungu

ambaye awali alikuwa Meneja wa

muundo msingi na maendeleo kama

kaimumsimamizi.

iv) Bw.ThomasOkelloOchiengaliteuliwa

kamaMeneja wa ubora wa shirika ili

kuangaziamaswalayanayohusianana

ubora wa bidhaa na huduma katika

nyanjazote.

Kama sehemu moja ya kuimarisha

sura ya shirika la kampuni, ujenzi wa

jengojipyalaofisizaMSCnakituocha

kuwashughulikiawakulimazilikamilika.

Kwasasajumbahilolikokatikahatamu

zamwishozaujenziililiwezekutumika.

Kesi, utatuzi wa mizozo na

uzingatiaji wa sheria.

Wakati wa kipindi hiki kinachoangaziwa,

mikakati mbali mbali ilikamilika ikiwemo

uanzishaji wa mfumo wa usimamizi

wa huduma za wakulima na kituo cha

dharura cha kuwashughulika wakulima,

kuweka pamoja mfumo wa usimamizi

wa kilimo (AMS) namfumo wa usimamizi

wa mawasiliano ya maabara (LIMS)

miongonimwanyingine.Mikakatimingine

ya kibiashara iliyokamilishwa ilikuwa ni

pamojana:utumiajiwamitambokupima

uzani wa miwa kwa kutumia kifaa cha

digiteli kinachojulikana kama personal

Digital Assistant devices ( PDA) , uzinduzi

wamfumowakutambuamagari–Vehicle

Identification System (VIS) na matumizi ya

kadimaalumu-smartcardsnaPDAskwenye

kiwandachauminyajimiwanauchukuziwa

mbegu.

Usalama, Afya na mazingira

Usalama, afya na mazingira zingali eneo

muhimu linaloangaziwa na kampuni na

zinachunguzwa kila wakati. Wakati wa

kipindichamwakaunaongaziwa,mtajiwa

kutosha ulitumiwa eneo hili ili kuhakikisha

uzingatiajiwamahitajiyakisheria.Kutokana

na hatua zilizochukuliwa na kampuni

kupunguza hatari, idadi ya majeruhi na

visavinavyohatarishausalamazimepungua

kwaharaka.Tunaendeleakuchukuahatua

zatahadharikupitiaukaguziwamarakwa

marawashughulizetu.

HITIMISHO NA MTAZAMO WA SIKU

ZA USONI

Kampuni imebunimkakatikwakipindicha

mwaka2012-2017.Eneolitakaloangaziwa

litahusu kuweka pamoja kiwanda chetu

cha uzalishaji ili kuboresha uzalishaji,

kuimarishautoajiwahudumakwawakulima

ilikupatamavunobora,upanuziwabidhaa

na uimarishaji wa usawa wa bidhaa,

kubuni mfumo thabiti wa usimamizi wa

hatarizinazokabilibiasharanakuhakikisha

kwamba tuna mtaji wa wafanyakazi ili

kustawishabiashara.

AsanteninaMunguawabariki.

Peter Kebati

Meneja Mkurugenzi




Corporate SoCial reSponSibilityCorPorate soCial resPonsibilitY

1.0 EDUCATION

MSC considers Education as a vitalcomponentof thelifelineof thecommunitywithinwhichitoperates.ItiswiththisinmindthatMSCcontinuestofundtheconstructionofschoolinfrastructurewithinthesugarcanezones. In the financial year ended June2013MSC funded the construction of 12classrooms in 11 schools spread acrossthe sugar belt. It is envisaged that theseclassroomswillgoalongwayinincreasingaccessibility to education within the MSCscheme.Itwillalsoreduceovercrowdinginclassrooms for the schools that benefittedthus making a tremendous contributiontowards provision of quality of Educationwithinthescheme.

MSC has also continued to support brightstudentstoaccessqualityeducationthrougha bursary scheme managed by ELIMU

TRUST. Through this scheme, 10 studentsfromthefarmers’householdsandanequalnumber from MSC staff are sponsoredannually to enable them access secondaryschooleducation.

MSChascontinued tobe the institutionofchoiceforstudentsseekinginternship.Eachyear we offer more than 450 internshippositions. Upon completion, the internswouldhavegainedaninvaluableexperiencethatwillenablethembetheperfectfitinanyworkenvironmentrelated.

2.0 Health and Sanitation

MSC realizes that government fundingtowards social welfare has continued to bebelow target given the level of increasingneeds. MSC has therefore been in theforefront in supporting the government toincreaseaccessibilityof itspeople toquality

health services. MSC continues to supportSt. Mary’s Hospital, Mumias, with a grantthat usually goes to an urgent project asselectedbythehospitalmanagementboard.St.Mary’sHospitalisstrategicallylocatedtoserveasareferralfacilityforboththefarmersandMSCstaffmembers.

Amongotherhealthinitiatives,MSChasalsodedicateditsresourcesinsupportingmedicalcampsandanti-jiggercampaigns.Inthejustconcluded financial year, of the companyreachedoutto6,386peoplewithinthesugarbeltduringtheanti-jiggercampaigns.

MSCcontinuedtosupport theMaterHeartrun,anevent thatbrings togetherKenyansin fundraising for children requiring openheart surgery performed annually atMaterHospital in Nairobi. A number of staffmembers, students from MSC sponsoredschools, other schools, colleges and universities plus several other people fromthecommunityparticipatedintherun.About2.9million shillings was raised during thisyear’sevent.

3.0 Environment

The importance of a clean and healthyenvironment cannot be overemphasized. Itis because of this that MSC has continuedto collaborate with other partners in theschemetoensurethatmeasuresthatgointocleaningand rehabilitating the environmentaregiven the importance that theydeserve.MSCparticipated in theplantingof95,000seedlings across the entire scheme. Thesurvivalratefortheseedlingshasbeenputatmore than90%.Thiswasachieved throughclose co-operation between the company,communitygroupsand learning institutions.The schools embraced the ‘Adopt-a-Tree’ campaign where each student wasassigned a seedling. He/she has to ensurethat it survives. Efforts were also put in theprotectionofriverinespringsandotherwatercatchmentareas.

Duringthesameperiod,MSCsponsoredthe“SaveKakamegaForestHalfMarathon”thatbroughttogetherabout300runners.Theaimof this runwas topromote theconservationefforts for the Kakamega forest which is

Corporate Social Responsibility (cont’d)CorPorate soCial resPonsibilitY (Cont’d)

among the few patches remaining of thegreatCentralAfricaEquatorialforestwhichused to stretch from Cameroon through CongotoEastAfrica.ThiswasthesecondyearthatMSCwassponsoringthisevent.

MSCstaffmembershavealsobeenactivelyinvolvedincleaningoftheenvironment.Intheendedyear,MSCstaffmembersjoinedmembers of Bungoma and Kakamegacounty governments and communitymembers in cleaning the townswithin thetwocountiesincludingMumiasTown.

4.0 Entrepreneurship and income generation

MSC has closely worked with farmersto ensure that their economic status isimprovement. The promotion of canefarming as a business enterprise hasensured that farmers invest in more timeand resources into their crop to avoidgettingnegative returnspopularly referredto as “DR”. To ensure that farmers havealternative source of income as they waitfor proceeds from their cane, MSC hassupported groups of farmers to engage in various types of income generatingactivities.Keyamongtheseisdairyfarmingandgrowingofsoyabeans.Othersincludefish farming, interlocking stabilized soilbricks,beekeepingandsettingupoutletsforMSCproductsinfarflungvillages.

5.0 Disaster Response and Recovery

MSC has continued to stand withcommunities whenever a calamity befallsthem.InApril,fivestudentsfromNambaleBoysHighSchoolperishedinagrislyroadaccident while on a school learning tripin the Rift Valley. MSC joined the familymembers and contributed towards theirburialexpenses.

Infuture,MSCplanstobuildtheresiliencecapacity of the community throughformation of disaster preparednessteams that will help in the formulation ofCommunity Disaster Preparedness Plans.School children will also be trained onfightingfireandfirstaid.



Corporate GovernanCe StatementCorPorate goVernanCe stateMent

Governance-related policy changes

introduced in recent yearshave increased

the focus on the need for directors to

continuallyensurethattheyaredischarging

their oversight responsibilities effectively.

The Board continues to endeavour to

ensure that good corporate governance

practices are upheldin the Company’s

operations.

THE BOARD AND DIRECTORS

The current Composition of the Board

is on page 6 of this report. As currently

constituted, the Directors are convinced

that the Board has the right people to

lead and manage all aspects of the

Company. The Board will continue to

review the composition of the Board in

order to address any skill gaps that may

be identified including gender balance.

The Board is sufficiently independent of

Management and as and when required,

theBoardcontinuestogetexpertadviceof

critical matters. The Board held quarterly

meetingstodeliberateandmakedecisions

onstrategicissuesaffectingtheCompany.

BOARD AUDIT COMMITTEE

The Board Audit Committee comprises

of Independent Directors in order for it

to execute its mandate independently.

As defined by its Charter, the Board has

givenmandate to theAuditCommittee to

consult with specialists or consultants to

assisttheCommitteewiththeperformance

of its functions. As part of ensuring its

oversight role, the Board receives reports

from the Audit Committee on quarterly

basis.Currently,theinternalauditfunction

isindependentofManagementoperations.

Through such independence, the Audit

Committee and the Board are convinced

thattheappropriateskillsandresourcesare

committed to the internalauditprocess in

ordertodeliveronexpectationsregarding

thereviewofinternalcontrols.

ETHICAL LEADERSHIP AND

CORPORATE CITIZENSHIP

As a corporate citizen, the Company

considers corporate citizenship,

sustainability and stakeholder inclusivity

askeypillarsfortheorganization.Various

Codes of Ethics and Conduct have been

approvedbytheBoardandemployeesand

Directorsare subjected to suchCodeson

acontinuousbasis.Policiesareinplaceto

guide every level of the business in terms

of expected behaviours and practices.

The Board also continues tomonitor and

addressthecorporatecitizenshipaswellas

sustainabilityrisks.

gOVERNANCE OF RISK

The Company has a well elaborate Risk

Management Framework that guides the

management of risks in the organization.

Risk awareness programs are held on

continuous basis to help Managers

manage the risks that are embedded in

various operations. A multi-disciplinary

team of well trained Risk Champions

Network has been formed to help the

organization in dealing with operational

risks.Majorriskshavebeenidentifiedand

riskappetite/tolerancelevelsagreedupon

betweentheBoardandManagement.Risk

assessment isencouragedasapreventive

risk management strategy. The Board

continuestoembedriskmanagementinits

strategicdiscussions/decisions.

gOVERNANCE OF INFORMATION

TECHNOLOgY

The Board has approved an ICT

governance framework that defines and

supports decision models, governance

structures, accountability and processes

in the Company. A lot of investment has

beenmadein ICTsystemsthatareaimed

atensuringthatITdrivestheoperationsof

the Company for competitive advantage.

The Board has on a regular basis

receivedprogressreportsontheprogress,

performance, control environment and

valueadditionofthemajorITprojects.

COMPLIANCE WITH LAWS, RULES,

CODES AND STANDARDS

The statutory and regulatory environment

is ever changing thus putting a lot of

compliance pressure on the Company.

As part of addressing the risks of non

compliance, the Company undertakes

proactivelegalauditstogaugecompliance

levels. Amethodofmonitoring continued

complianceaswellasaddressingidentified

gapsisinplace.

INTERgRATED REPORTINg AND

DISCLOSURE

Asanintegratedorganization,theCompany

continues to integrate development issues

suchassuchasrisk,environmental,legaland

financialconcerns into thestrategy,policies

andactivitiesof theCompany. In the course

of the period under review, the Company

appointed a Strategy and Reporting Advisor

to advise the Board and Management on

sustainabilityandintegratedreportingmatters.

ALTERNATIVE DISPUTE RESOLUTIONS

The Company continues to resolve any

emerging disputes on mutual basis. Various

ADR mechanisms are employed at various

levels of our organization. Where such

mechanisms have failed, the Company has

soughtotherresolutionmeasuresthroughthe

courtsoflaw.Thekeyoutstandingdisputesand

litigationsthatareconsideredtobeofmaterial

impact are disclosed in this report. Arising

fromsuchdisputes,theCompanycontinuesto

review itsoperationsonanongoingbasis in

ordertominimizedisputes.

REMUNERATION OF DIRECTORS AND

SENIOR EXECUTIVES

The remuneration of the Board Directors and

Senior Executives is based on comparative

remunerationinCompany’sofsimilarpositioning.

The Board believes that the remuneration

packagescurrentlyinforcearenotexcessiveand

ranklowerthanbestpracticesinthejobmarket.

Thestaffsalariesaredisclosedintheseaccounts.

Corporate GovernanCe Statement (Cont’d)CorPorate goVernanCe stateMent (Con’d)



Thedirectorspresenttheirreporttogetherwiththeauditedfinancialstatementsofthecompanyfortheyearended30June2013,whichshowsitsstateofaffairs.

PRINCIPAL ACTIVITIES

Theprincipalactivitiesofthecompanyaretheproductionandsaleofsugar,ethanol,waterandthegenerationandsaleofelectricity. Shs’000RESULTS

Profitbeforetaxation (2,235,999)Taxationcredit 566,283

Lossfortheyear (1,669,716)

DIVIDENDS

Thedirectorsdonotrecommendpaymentofadividendfortheyear(2012:Shs0.50)

PRODUCTION

Thefollowingarethecomparativestatisticsofcaneprocessedandsugarproductionforthelastfiveyears:

Cane Sugar Processed production (Tonnes) (Tonnes)

2013 1,719,920 147,3202012 1,917,340 174,0052011 2,245,281 235,8122010 2,318,080 235,7922009 2,161,031 231,014

DIRECTORS

Thecurrentdirectorsofthecompanyarelistedonpage6.

MrSBunyasi,MrJohnMruttuandMrKunguGatabakiresignedasdirectorsofthecompanyduringtheyearwhileHonAmosWakoretiredasadirectorduringtheyear.TheywerereplacedbyMrNimrodNamenge,MrJamesOpindiandMrsNancyKaminchiaduringtheAnnualGeneralMeetingheldon7December2012. AUDITORS

Deloitte&Touche,havingexpressedtheirwillingness,continueinofficeinaccordancewithSection159(2)oftheKenyanCompaniesAct.

BYORDEROFTHEBOARD

Secretary2ndSeptember2013Mumias

RepoRt of the DiRectoRsrePort of tHe direCtors

MuMias sugar CoMpany LiMited FinanCiaL stateMents For the year ended 30 June 2013

TheKenyanCompaniesActrequiresthedirectorstopreparefinancialstatementsforeachfinancialyearwhichgiveatrueandfairviewofthestateofaffairsofthecompanyasattheendofthefinancialyearandofitsoperatingresultsforthatyear.Italsorequiresthedirectorstoensurethatthecompanykeepsproperaccountingrecordswhichdisclosewithreasonableaccuracyatanytimethefinancial

positionofthecompany.Theyarealsoresponsibleforsafeguardingtheassetsofthecompany.

ThedirectorsareresponsibleforthepreparationoffinancialstatementsthatgiveatrueandfairviewinaccordancewithInternationalFinancialReportingStandardsandtherequirementsoftheKenyanCompaniesAct,andforsuchinternalcontrolsasthedirectorsdeterminearenecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatements,whetherduetofraudorerror.

Thedirectorsacceptresponsibilityfortheannualfinancialstatements,whichhavebeenpreparedusingappropriateaccountingpoliciessupportedbyreasonableandprudentjudgementsandestimates,inconformitywithInternationalFinancialReportingStandardsandinthemannerrequiredbytheKenyanCompaniesAct.Thedirectorsareoftheopinionthatthefinancialstatementsgiveatrueandfairviewofthestateofthefinancialaffairsofthecompanyandofitsoperatingresults.Thedirectorsfurtheracceptresponsibilityforthemaintenanceofaccountingrecordswhichmayberelieduponinthepreparationoffinancialstatements,aswellasadequatesystemsofinternalfinancialcontrol.

Nothinghascometotheattentionofthedirectorstoindicatethatthecompanywillnotremainagoingconcernforatleastthenexttwelvemonthsfromthedateofthisstatement.

___________________________ _________________________ Director Director

2ndSeptember2013

Statement of DirectorS’ reSponSibilitieSstateMent of direCtors’ resPonsibilities



INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OFMUMIAS SUGAR COMPANY LIMITED

Report on the Financial Statements

We have audited the accompanying financial statements of Mumias Sugar Company Limited (the “company”), set outon pages 33 to 84 which comprise the statement of financial position as at 30 June 2013, and the statement ofcomprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and asummary of significant accounting policies and other explanatory notes.

Directors Responsibility for the Financial Statements

The directors are responsible for the preparation of financial statements that give a true and fair view in accordance withInternational Financial Reporting Standards and the requirements of the Kenyan Companies Act, and for such internalcontrols as directors determine are necessary to enable the preparation of financial statements that are free from materialmisstatement, whether due to fraud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit inaccordance with International Standards on Auditing. Those standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free frommaterial misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on our judgement, including the assessment of the risks of materialmisstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consideredthe internal controls relevant to the company’s preparation of financial statements that give a true and fair view in orderto design audit procedures that were appropriate in the circumstances, but not for the purpose of expressing an opinionon the effectiveness of the company’s internal controls. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating theoverall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the company as at30 June 2013 and of its financial performance and cash flows for the year then ended in accordance with InternationalFinancial Reporting Standards and the requirements of the Kenyan Companies Act.

Report on Other Legal Requirements

As required by the Kenyan Companies Act, we report to you, based on our audit that:i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;ii) in our opinion, proper books of account have been kept by the company, so far as appears from our examination of those books; andiii) the company’s statement of financial position (balance sheet) and statement of comprehensive income (profit and loss account) are in agreement with the books of account.

Certified Public Accountants (Kenya)Nairobi Signed by: F o. Aloo 2 September 2012

Deloitte&ToueheCertifiedPublicAccountants(Kenya)DeloittePlaceWaiyakiWay,MuthangariP.0.Box40092-GPO00100NairobiKenyaTel:+254-(20)4230000Cell:+254(0)719039000Fax:+254(20)4448966DroppingZoneNo.92E-mail:[email protected]

partners: s. o. onyango F. o. aloo h. Cadhoke* n. r. hira* B. W. irungu i. Karim J. M. Kiaries d. M. Mbogho a. n. Muraya r. Mwaura J. nyang’aya J. W. Wangai

* British

2013 2012 Note Shs’000 Shs’000

Revenue 4 11,957,823 15,542,686

Fairvalue/(loss)gainonbiologicalassets 16 (13,781) 5,678

Operatingincome 11,944,042 15,548,364

Costofsales (10,395,794) (11,060,657)

Grossprofit 1,548,248 4,487,707

Otheroperatingincome 237,286 133,031

Marketinganddistributioncosts (870,920) (733,345)

Administrativeexpenses (1,939,560) (1,567,202) Otheroperatingexpenses (880,401) (825,547)

Financeincome 5(a) 394,336 411,023

Financecosts 5(b) (724,988) (141,638)

(Loss)/Profitbeforetaxation 6 (2,235,999) 1,764,029

Taxationcredit 8 566,283 248,650 _________ _________

(Loss)/Profitfortheyear (1,669,716) 2,012,679

OTHERCOMPREHENSIVEINCOME

TOTAL COMPREHENSIVE INCOME FOR THE YEAR (1,669,716) 2,012,679

Shs Shs

(Loss)/Earningspershare-basic&diluted 9 (1.09) 1.32

Statement of ComprehenSive inCome stateMent of CoMPreHensiVe inCoMe





2013 2012 Note Shs’000 Shs’000ASSETSNon current assetsProperty,plantandequipment 11 19,615,082 19,810,560Intangibleassets 12 315,676 206,603Noncurrentreceivables 14 157,695 150,090

20,088,453 20,167,253

Current assetsInventories 15 2,463,064 1,676,088Biologicalassets 16 219,378 191,093Tradeandotherreceivables 17 3,765,866 4,584,048Taxationrecoverable 8(c) 183,102 200,214Collateraldeposit 18 301,925 294,817Shorttermdeposits 19 - 51,797Quotedinvestments–Atfairvaluethroughprofitorloss 20 44,106 35,240Cashandbankbalances 70,923 138,063

7,048,364 7,171,360

Non current assets held for sale 21 11,576 61,500 7,059,940 7,232,860

Total assets 27,148,393 27,400,113

EQUITY AND LIABILITIESEquitySharecapital 22 3,060,000 3,060,000Revaluationsurplus 3,173,432 3,350,880Retainedearnings 7,055,538 9,312,806

Shareholders’ equity 13,288,970 15,723,686

Non current liabilitiesDeferredincometaxationliability 23 2,443,472 3,027,494Provisionforservicegratuity 24(a) 10,464 2,747Deferredgrantincome 25 15,379 -Longtermborrowings 26 2,981,335 2,925,531

5,450,650 5,955,772 Current liabilitiesBorrowings 26 3,058,448 2,463,448Tradeandotherpayables 27 4,844,672 2,928,017Provisionforservicegratuity 24(a) 5,652 1,201Provisionforstaffleavepay 28 43,626 28,552Unclaimeddividends 10(b) 456,375 299,437 8,408,773 5,720,655

Total equity and liabilities 27,148,393 27,400,113

Thefinancialstatementsonpages33to84wereapprovedandauthorisedforissuebytheboardofdirectorson2ndSeptember2013andweresignedonitsbehalfby:

Director Director

Statement of financial PoSitionstateMent of finanCial Position

At 30 June 2013


Share Revaluation Retained capital surplus earnings Total Shs’000 Shs’000 Shs’000 Shs’000

At1July2011 3,060,000 3,552,456 7,863,551 14,476,007Totalcomprehensiveincomefortheyear - - 2,012,679 2,012,679Finaldividenddeclared-2011 - - (765,000) (765,000)Transferondisposalofequipment - (70,938) 70,938 -Deferredtaxationtransferredondisposalofequipment - 21,281 (21,281) -Transferofexcessdepreciation - (217,028) 217,028 -Deferredtaxationonexcessdepreciation - 65,109 (65,109) -

At30June2012 3,060,000 3,350,880 9,312,806 15,723,686

At1July2012 3,060,000 3,350,880 9,312,806 15,723,686 Totalcomprehensivelossfortheyear - - (1,669,716) (1,669,716)Finaldividenddeclared-2012 - - (765,000) (765,000)Transferondisposalofequipment - (30,653) 30,653 -Deferredtaxationtransferredondisposalofequipment - 9,196 (9,196) -Transferofexcessdepreciation - (222,845) 222,845 -Deferredtaxationonexcessdepreciation - 66,854 (66,854) - At30June2013 3,060,000 3,173,432 7,055,538 13,288,970

Therevaluationsurplusrepresentsthenetcumulativesurplusarisingfromrevaluationofproperty,plantandequipmentnetofdeferredtaxation.Therevaluationsurplusisnon-distributable.

Statement of ChangeS in equitystateMent of CHanges in equitY





2013 2012 Note Shs’000 Shs’000

CASH FLOWS FROM OPERATINg ACTIVITIES

Netcashgeneratedfromoperations 29(a) 1,332,306 1,913,291Interestpaid (729,861) (197,783)Interestreceived 394,336 411,023Otherfinancechargespaid (63,710) (10,569)Taxationpaid 8(c) (627) (1,410)

Netcashgeneratedfromoperatingactivities 932,444 2,114,552

CASH FLOWS FROM INVESTINg ACTIVITIES

Additionstoproperty,plantandequipment 11 (1,216,026) (4,392,139)Additionstointangibleassets 12 (19,893) (44,455)Proceedsondisposalofnon-currentassetsheldforsale 1,865 42,158Proceedsondisposalofmotorvehicles - 517

Netcashusedininvestingactivities (1,234,054) (4,393,919)

CASH FLOWS FROM FINANCINg ACTIVITIES

Dividendpaid 10(b) (608,062) (748,523)Loansreceived 29(b) 2,726,346 1,973,773Loansrepaid 29(b) (1,492,145) (882,507)KenyaSugarBoardgrantreceived 25 15,379 -

Netcashgeneratedfromfinancingactivities 641,518 342,743

NET INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS 339,908 (1,936,624)

CASH AND CASH EQUIVALENTS AT THE BEgINNINg OF THE YEAR (1,280,189) 656,435

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 29(c) (940,281) (1,280,189)

Statement of CaSh flowSstateMent of CasH flows



AmendmentstoIFRS7Disclosures–TransfersofFinancialAssets

AmendmentstoIAS12DeferredTax,RecoveryofUnderlyingAssets

AmendmentstoIFRS1SevereHyperinflation

AmendmenttoIFRS1:Removaloffixeddatesforfirsttimeadopters

TheamendmentstoIFRS7increasethedisclosurerequirementsfortransactionsinvolvingtransfersoffinancialassets.Theseamendmentsareintendedtoprovidegreatertransparencyaroundriskexposuresoftransactionswhereafinancialassetistransferredbutthetransferorretainssomelevelofcontinuingexposureintheasset

Theapplicationoftheamendmenthadnoeffectonthecompany’sfinancialstatementsasthecompanydidnottransferanysuchfinancialassetsduringtheyear.

TheamendmentstoIAS12provideanexceptiontothegeneralprinciplesetoutinIAS12,IncomeTaxes,thatthemeasurementofdeferredtaxshouldreflectthemannerinwhichanentityexpectstorecoverthecarryingamountofanasset.Specifically,theamendmentsestablisharebuttablepresumptionthatthecarryingamountofaninvestmentpropertymeasuredusingthefairvaluemodelinIAS40,InvestmentProperty,willberecoveredentirelythroughsale.TheamendmentswereissuedinresponsetoconcernsthatapplicationofIAS12’sgeneralapproachcanbedifficultorsubjectiveforinvestmentpropertymeasuredatfairvaluebecauseitmaybethattheentityintendstoholdtheassetforanindefiniteorindeterminateperiodoftime,duringwhichitanticipatesbothrentalincomeandcapitalappreciation.

Theapplicationoftheamendmenthadnoimpactonthecompany’sinvestmentpropertiesasthecompanyintendstoholdtheinvestmentpropertiesoveranindefiniteperiodoftime.

TheamendmentsregardingseverehyperinflationprovideguidanceforentitiesemergingfromseverehyperinflationeithertoresumepresentingIFRSfinancialstatementsortopresentIFRSfinancialstatementsforthefirsttime

Theamendmentshadnoeffectonthecompany’sfinancialstatementsasthecompanydidnotoperateinahyper-inflationaryenvironment.

TheamendmentsregardingtheremovaloffixeddatesproviderelieftofirsttimeadoptersofIFRS’sforreconstructingtransactionsthatoccurredbeforethedatesoftransitiontoIFRSs.TheamendmenthadnoeffectonthecompanyasitisnotafirsttimeadopterofIFRS.

1 PRINCIPAL ACCOUNTINg POLICIES

a) Statement of compliance

ThefinancialstatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(IFRS).

FortheKenyanCompaniesActreportingpurposes,inthesefinancialstatements,thebalancesheetisrepresentedby/equivalenttothestatementoffinancialpositionandtheprofitandlossaccountispresentedinthestatementofcomprehensiveincome.

b) Application of new and revised International Financial Reporting Standards (IFRSs)

(i) New standards and amendments to published standards effective for the year ended 30 June 2013

ThefollowingnewandrevisedIFRSswereeffectiveinthecurrentyearandhadnomaterialimpactontheamountsreportedinthesefinancialstatements.

Notesnotes




1 PRINCIPAL ACCOUNTINg POLICIES (cont’d)

b) Application of new and revised International Financial Reporting Standards (IFRSs) (Continued)

(i) New standards and amendments to published standards effective for the year ended 30 June 2013 (cont’d)


• Presentation of Items of Other Comprehensive Income (Amendments to IAS 1)

TheseamendIAS1,PresentationofFinancialStatements,torevisethewayothercomprehensiveincomeispresented.

The amendments:

• PreservetheamendmentsmadetoIAS1in2007torequireprofitorlossandothercomprehensiveincome

tobepresentedtogether,i.e.eitherasasingle‘statementofprofitorlossandcomprehensiveincome’,or

aseparate‘statementofprofitorloss’anda‘statementofcomprehensiveincome’–ratherthanrequiringa

singlecontinuousstatement.

• Requireentitiestogroupitemspresentedinothercomprehensiveincomebasedonwhethertheyare

potentiallyreclassifiabletoprofitorlosssubsequentlyi.e.thosethatmightbereclassifiedandthosethatwill

notbereclassified.

• Requiretaxassociatedwithitemspresentedbeforetaxtobeshownseparatelyforeachofthetwogroupsof

othercomprehensiveincomeitems(withoutchangingtheoptiontopresentitemsofothercomprehensive

incomeeitherbeforetaxornetoftax).

Theaboveamendmentsaregenerallyeffectiveforannualperiodsbeginningonorafter1July2012.Thecompany

hasappliedtheamendments.Otherthanpresentation,therehasbeennomaterialimpacttothecompany’sfinancial

statements.

• Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12)

TheseamendIAS12,IncomeTaxes,toprovideapresumptionthatrecoveryofthecarryingamountofanasset

measuredusingthefairvaluemodelinIAS40,InvestmentProperty,willnormallybethroughsale.Asaresultof

theamendments,SIC-21,IncomeTaxes—RecoveryofRevaluedNon-DepreciableAssets,wouldnolongerapply

toinvestmentpropertiescarriedatfairvalue.TheamendmentsalsoincorporateintoIAS12theremainingguidance

previouslycontainedinSIC-21,whichisaccordinglywithdrawn.

Theaboveamendmentsaregenerallyeffectiveforannualperiodsbeginningonorafter1January2012.Thecompany

willapplythisamendmentprospectively.Thedirectorsanticipatenomaterialimpacttothecompany’sfinancialstatements

currentlyasthecompanydoesnothaveinvestmentproperties.However,thecompanywouldhavetoapplythisstandardto

anysucharrangementsenteredintointhefuture

Notes (coNt’d)notes (Cont’d)



(ii) New and amended standards and interpretations in issue but not yet effective in the year ended 30 June 2013



Effective for annual periods beginning on or after

1January2015

1January2013

1January2013

1January2013

1January2013

1January2013

1January2015

1January2013

1January2013

1January2013

1January2013

1January2014

1January2013

1January2013

1January2014

New and amendments to standards

IFRS9,FinancialInstruments

IFRS10,ConsolidatedFinancialStatements

IFRS11,JointArrangements

IFRS12,DisclosureofInterestsinOtherEntities

IFRS13,FairValueMeasurement

AmendmentstoIFRS7Disclosures-OffsettingFinancialAssetsandFinancialLiabilities

AmendmentstoIFRS9andIFRS7MandatoryEffectiveDateofIFRS9andTransitionDisclosures

AmendmentstoIFRS10,IFRS11andIFRS12ConsolidatedFinancialStatements,JointArrangementsandDisclosureofInterestsinOtherEntities:TransitionGuidance

IAS19,EmployeeBenefits(asrevisedin2011)

IAS27,SeparateFinancialStatements(asrevisedin2011)

IAS28,InvestmentsinAssociatesandJointVentures(asrevisedin2011)

IAS32,FinancialInstruments:Presentation–Amendmentstoapplicationguidanceontheoffsettingoffinancialassetsandfinancialliabilities

AnnualImprovementstoIFRSs2009-2011Cycle

New interpretation

IFRIC20StrippingCostsintheProductionPhaseofaSurfaceMine

IFRIC21Levies





(iii) Impact of relevant new and revised IFRSs in issue but not yet effective for the year ended 30 June 2013



• IFRS 9, Financial Instruments

IFRS9issuedinNovember2009introducesnewrequirementsfortheclassificationandmeasurementoffinancial

assets.IFRS9amendedinOctober2010includestherequirementsfortheclassificationandmeasurementof

financialliabilitiesandforderecognition.

IFRS9requiresallrecognisedfinancialassetsthatarewithinthescopeofIAS39FinancialInstruments:Recognition

andMeasurementtobesubsequentlymeasuredatamortisedcostorfairvalue.Specifically,debtinvestmentsthat

areheldwithinabusinessmodelwhoseobjectiveistocollectthecontractualcashflows,andthathavecontractual

cashflowsthataresolelypaymentsofprincipalandinterestontheprincipaloutstandingaregenerallymeasuredat

amortisedcostattheendofsubsequentaccountingperiods.Allotherdebtinvestmentsandequityinvestmentsare

measuredattheirfairvaluesattheendofsubsequentaccountingperiods.

ThemostsignificanteffectofIFRS9regardingtheclassificationandmeasurementoffinancialliabilitiesrelatesto

theaccountingforchangesinfairvalueofafinancialliability(designatedasatfairvaluethroughprofitorloss)

attributabletochangesinthecreditriskofthatliability.Specifically,underIFRS9,forfinancialliabilitiesthatare

designatedasatfairvaluethroughprofitorloss,theamountofchangeinthefairvalueofthefinancialliability

thatisattributabletochangesinthecreditriskofthatliabilityisrecognisedinothercomprehensiveincome,unless

therecognitionoftheeffectsofchangesintheliability’screditriskinothercomprehensiveincomewouldcreateor

enlargeanaccountingmismatchinprofitorloss.Changesinfairvalueattributabletoafinancialliability’screditrisk

arenotsubsequentlyreclassifiedtoprofitorloss.Previously,underIAS39,theentireamountofthechangeinthefair

valueofthefinancialliabilitydesignatedasatfairvaluethroughprofitorlosswasrecognisedinprofitorloss.

IFRS9iseffectiveforannualperiodsbeginningonorafter1January2015,withearlierapplicationpermitted.

ThedirectorsanticipatethatIFRS9willbeadoptedinthecompany’sfinancialstatementsfortheannualperiod

beginning1January2015andthattheapplicationofIFRS9willnothaveasignificantimpactonamountsreported

inrespectofthecompany’sfinancialassetsandfinancialliabilitiesbecausecurrently,thecompanyonlyhassimple

financialinstrumentswhosemeasurementswillnotbeaffectedbythisstandard.

• IFRS 10, Consolidated financial statements

Requiresaparenttopresentconsolidatedfinancialstatementsasthoseofasingleeconomicentity,replacing

therequirementspreviouslycontainedinIAS27Consolidated and Separate Financial Statements and SIC-12

Consolidation - Special Purpose Entities.

TheStandardidentifiestheprinciplesofcontrol,determineshowtoidentifywhetheraninvestorcontrolsaninvestee

andthereforemustconsolidatetheinvestee,andsetsouttheprinciplesforthepreparationofconsolidatedfinancial

statements.



(iii) Impact of relevant new and revised IFRSs in issue but not yet effective for the year ended 30 June 2013 (cont’d)



TheStandardintroducesasingleconsolidationmodelforallentitiesbasedoncontrol,irrespectiveofthenatureofthe

investee(i.e.whetheranentityiscontrolledthroughvotingrightsofinvestorsorthroughothercontractualarrangements

asiscommonin‘specialpurposeentities’).UnderIFRS10,controlisbasedonwhetheraninvestorhas:

• Powerovertheinvestee

• Exposure,orrights,tovariablereturnsfromitsinvolvementwiththeinvestee,and

• Theabilitytouseitspowerovertheinvesteetoaffecttheamountofthereturns.

• IFRS 11, Joint arrangements

ReplacesIAS31Interests in Joint Ventures. Requiresapartytoajointarrangementtodeterminethetypeofjoint

arrangementinwhichitisinvolvedbyassessingitsrightsandobligationsandthenaccountforthoserightsand

obligationsinaccordancewiththattypeofjointarrangement.

Jointarrangementsareeitherjointoperationsorjointventures:

• Ajointoperationisajointarrangementwherebythepartiesthathavejointcontrolofthearrangement(joint

operators)haverightstotheassets,andobligationsfortheliabilities,relatingtothearrangement.Joint

operatorsrecognisetheirassets,liabilities,revenueandexpensesinrelationtoitsinterestinajointoperation

(includingtheirshareofanysuchitemsarisingjointly)

• Ajointventureisajointarrangementwherebythepartiesthathavejointcontrolofthearrangement(joint

venturers)haverightstothenetassetsofthearrangement.Ajointventurerappliestheequitymethodof

accountingforitsinvestmentinajointventureinaccordancewithIAS28Investments in Associates and

Joint Ventures(2011).UnlikeIAS31,theuseof‘proportionateconsolidation’toaccountforjointventuresis

notpermitted.

• IFRS 12, Disclosure of interests in other entities

Requirestheextensivedisclosureofinformationthatenablesusersoffinancialstatementstoevaluatethenatureof,

andrisksassociatedwith,interestsinotherentitiesandtheeffectsofthoseinterestsonitsfinancialposition,financial

performanceandcashflows.

Inhigh-levelterms,therequireddisclosuresaregroupedintothefollowingbroadcategories:

• Significant judgements and assumptions -suchashowcontrol,jointcontrol,significantinfluence

hasbeendetermined

• Interests in subsidiaries-includingdetailsofthestructureofthegroup,risksassociatedwithstructured

entities,changesincontrol,andsoon

• Interests in joint arrangements and associates-thenature,extentandfinancialeffectsofinterests

injointarrangementsandassociates(includingnames,detailsandsummarisedfinancialinformation)

• Interests in unconsolidated structured entities -informationtoallowanunderstandingofthe

natureandextentofinterestsinunconsolidatedstructuredentitiesandtoevaluatethenatureof,andchanges

in,therisksassociatedwithitsinterestsinunconsolidatedstructuredentities








IFRS12listsspecificexamplesandadditionaldisclosureswhichfurtherexpanduponeachofthesedisclosureobjectives,andincludesotherguidanceontheextensivedisclosuresrequired.

• IFRS 13, Fair Value Measurements

IFRS13replacestheguidanceonfairvaluemeasurementinexistingIFRSaccountingliteraturewithasinglestandard.TheIFRSistheresultofjointeffortsbytheIASBandFASBtodevelopaconvergedfairvalueframework.TheIFRSdefinesfairvalue,providesguidanceonhowtodeterminefairvalueandrequiresdisclosuresaboutfairvaluemeasurements.However,IFRS13doesnotchangetherequirementsregardingwhichitemsshouldbemeasuredordisclosedatfairvalue.

IFRS13applieswhenanotherIFRSrequiresorpermitsfairvaluemeasurementsordisclosuresaboutfairvaluemeasurements(andmeasurements,suchasfairvaluelesscoststosell,basedonfairvalueordisclosuresaboutthosemeasurements).

Withsomeexceptions,thestandardrequiresentitiestoclassifythesemeasurementsintoa‘fairvaluehierarchy’basedonthenatureoftheinputs:• Level1-quotedpricesinactivemarketsforidenticalassetsorliabilitiesthattheentitycanaccessatthe

measurement date;• Level2-inputsotherthanquotedmarketpricesincludedwithinLevel1thatareobservablefortheassetor

liability,eitherdirectlyorindirectly;and• Level3-unobservableinputsfortheassetorliability.

IFRS13iseffectiveforannualperiodsbeginningonorafter1January2013,withearlierapplicationpermitted.

ThedirectorsanticipatethatIFRS13willbeadoptedinthecompany’sfinancialstatementsfortheannualperiodbeginning1January2013andthattheapplicationofthenewStandardwillresultinmoreextensivedisclosuresinthefinancialstatements.

• IAS 19 (as revised in 2011)- Employee Benefits

AnamendedversionofIAS19EmployeeBenefitswithrevisedrequirementsforpensionsandotherpost-retirementbenefits,terminationbenefitsandotherchanges.Thekeyamendmentsinclude:• Requiringtherecognitionofchangesinthenetdefinedbenefitliability(asset)includingimmediate

recognitionofdefinedbenefitcost,disaggregationofdefinedbenefitcostintocomponents,recognitionofremeasurementsinothercomprehensiveincome,planamendments,curtailmentsandsettlements(eliminatingthe‘corridorapproach’permittedbytheexistingIAS19)

• Introducingenhanceddisclosuresaboutdefinedbenefitplans• Modifyingaccountingforterminationbenefits,includingdistinguishingbenefitsprovidedinexchangefor

serviceandbenefitsprovidedinexchangefortheterminationofemploymentandaffecttherecognitionandmeasurementofterminationbenefits

• Clarifyingvariousmiscellaneousissues,includingtheclassificationofemployeebenefits,currentestimatesofmortalityrates,taxandadministrationcostsandrisk-sharingandconditionalindexationfeatures

• IncorporatingothermatterssubmittedtotheIFRSInterpretationsCommittee.






TheamendmentstoIAS19areeffectiveforannualperiodsbeginningonorafter1January2013andrequireretrospectiveapplicationwithcertainexceptions.TheamendmentstoIAS19willbeadoptedinthecompany’sfinancialstatementsforthefinancialyearending30June2014.Duringtheyearended30June2013,thenetassetarisingfromthedefinedbenefitobligationwasShs55,000,000whichhasnotbeenrecognisedinthesefinancialstatements.TheimpactoftheretrospectiveapplicationwillbetoincreasetheassetsofthecompanybyShs55,000,000.

• IAS 27 Separate Financial Statements (2011)

AmendedversionofIAS27whichnowonlydealswiththerequirementsforseparatefinancialstatements,whichhavebeencarriedoverlargelyunchangedfromIAS27ConsolidatedandSeparateFinancialStatements.RequirementsforconsolidatedfinancialstatementsarenowcontainedinIFRS10ConsolidatedFinancialStatements.

TheStandardrequiresthatwhenanentitypreparesseparatefinancialstatements,investmentsinsubsidiaries,associates,andjointlycontrolledentitiesareaccountedforeitheratcost,orinaccordancewithIFRS9FinancialInstruments/IAS39FinancialInstruments:RecognitionandMeasurement.

TheStandardalsodealswiththerecognitionofdividends,certaingroupreorganisationsandincludesanumberof

disclosurerequirements.

• IAS 28 Investments in Associates and Joint Ventures (2011)

ThisStandardsupersedesIAS28InvestmentsinAssociatesandprescribestheaccountingforinvestmentsinassociatesandsetsouttherequirementsfortheapplicationoftheequitymethodwhenaccountingforinvestmentsinassociatesandjointventures.

TheStandarddefines‘significantinfluence’andprovidesguidanceonhowtheequitymethodofaccountingistobeapplied(includingexemptionsfromapplyingtheequitymethodinsomecases).Italsoprescribeshowinvestmentsinassociatesandjointventuresshouldbetestedforimpairment.

• Disclosures — Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7)

AmendsthedisclosurerequirementsinIFRS7FinancialInstruments:Disclosurestorequireinformationaboutallrecognisedfinancialinstrumentsthataresetoffinaccordancewithparagraph42ofIAS32FinancialInstruments:Presentation.

TheamendmentsalsorequiredisclosureofinformationaboutrecognisedfinancialinstrumentssubjecttoenforceablemasternettingarrangementsandsimilaragreementseveniftheyarenotsetoffunderIAS32.TheIASBbelievesthatthesedisclosureswillallowfinancialstatementuserstoevaluatetheeffectorpotentialeffectofnettingarrangements,includingrightsofset-offassociatedwithanentity’srecognisedfinancialassetsandrecognisedfinancialliabilities,ontheentity’sfinancialposition.

• Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) AmendsIAS32FinancialInstruments:Presentationtoclarifycertainaspectsbecauseofdiversityinapplicationofthe

requirementsonoffsetting,focusedonfourmainareas:• themeaningof‘currentlyhasalegallyenforceablerightofset-off’

• theapplicationofsimultaneousrealisationandsettlement





• theoffsettingofcollateralamounts• theunitofaccountforapplyingtheoffsettingrequirements.

• government Loans (Amendments to IFRS 1)

AmendsIFRS1First-timeAdoptionofInternationalFinancialReportingStandardstoaddresshowafirst-timeadopterwouldaccountforagovernmentloanwithabelow-marketrateofinterestwhentransitioningtoIFRSs.TheamendmentsmirrortherequirementsforexistingIFRSpreparersinrelationtotheapplicationofamendmentsmadetoIAS20AccountingforGovernmentGrantsandDisclosureofGovernmentAssistanceinrelationtoaccountingforgovernmentloans.

First-timeadoptersofIFRSsarepermittedtoapplytherequirementsinparagraph10AofIAS20onlytonew

loansenteredintoafterthedateoftransitiontoIFRSs.Thefirst-timeadopterisrequiredtoapplyIAS32FinancialInstruments:Presentationtoclassifytheloanasafinancialliabilityoranequityinstrumentatthetransitiondate.However,ifitdidnot,underitspreviousGAAP,recogniseandmeasureagovernmentloanatabelow-marketrateofinterestonabasisconsistentwithIFRSrequirements,itwouldbepermittedtoapplythepreviousGAAPcarryingamountoftheloanatthedateoftransitionasthecarryingamountoftheloanintheopeningIFRSstatementoffinancialposition.AnentitywouldthenapplyIAS39orIFRS9inmeasuringtheloanafterthetransitiondate.

• Annual Improvements 2009-2011 Cycle

Makesamendmentstothefollowingstandards:

• IFRS1—PermittherepeatedapplicationofIFRS1,borrowingcostsoncertainqualifyingassets• IAS1—Clarificationoftherequirementsforcomparativeinformation• IAS16—Classificationofservicingequipment• IAS32—Clarifythattaxeffectofadistributiontoholdersofequityinstrumentsshouldbeaccountedforin

accordancewithIAS12IncomeTaxes• IAS34—Clarifyinterimreportingofsegmentinformationfortotalassetsinordertoenhanceconsistency

withtherequirementsinIFRS8OperatingSegments

• Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance

AmendsIFRS10ConsolidatedFinancialStatements,IFRS11JointArrangementsandIFRS12DisclosureofInterestsinOtherEntitiestoprovideadditionaltransitionreliefinbylimitingtherequirementtoprovideadjustedcomparativeinformationtoonlytheprecedingcomparativeperiod.Also,amendmentstoIFRS11andIFRS12eliminatetherequirementtoprovidecomparativeinformationforperiodspriortotheimmediatelyprecedingperiod.

• Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

AmendsIFRS10ConsolidatedFinancialStatements,IFRS12DisclosureofInterestsinOtherEntitiesandIAS27SeparateFinancialStatementsto:• provide‘investmententities’(asdefined)anexemptionfromtheconsolidationofparticularsubsidiariesand

insteadrequirethataninvestmententitymeasuretheinvestmentineacheligiblesubsidiaryatfairvaluethroughprofitorlossinaccordancewithIFRS9FinancialInstrumentsorIAS39FinancialInstruments:






RecognitionandMeasurement• requireadditionaldisclosureaboutwhytheentityisconsideredaninvestmententity,detailsoftheentity’s

unconsolidatedsubsidiaries,andthenatureofrelationshipandcertaintransactionsbetweentheinvestmententityanditssubsidiaries

• requireaninvestmententitytoaccountforitsinvestmentinarelevantsubsidiaryinthesamewayinitsconsolidatedandseparatefinancialstatements(ortoonlyprovideseparatefinancialstatementsifallsubsidiariesareunconsolidated).

• Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36)

AmendsIAS36ImpairmentofAssetstoreducethecircumstancesinwhichtherecoverableamountofassetsorcash-generatingunitsisrequiredtobedisclosed,clarifythedisclosuresrequired,andtointroduceanexplicitrequirementtodisclosethediscountrateusedindeterminingimpairment(orreversals)whererecoverableamount(basedonfairvaluelesscostsofdisposal)isdeterminedusingapresentvaluetechnique.

• NovationofDerivativesandContinuationofHedgeAccounting’(AmendmentstoIAS39)

AmendsIAS39FinancialInstruments:RecognitionandMeasurementmakeitclearthatthereisnoneedtodiscontinuehedgeaccountingifahedgingderivativeisnovated,providedcertaincriteriaaremet.

Anovationindicatesaneventwheretheoriginalpartiestoaderivativeagreethatoneormoreclearing

counterpartiesreplacetheiroriginalcounterpartytobecomethenewcounterpartytoeachoftheparties.Inordertoapplytheamendmentsandcontinuehedgeaccounting,novationtoacentralcounterparty(CCP)musthappenasaconsequenceoflawsorregulationsortheintroductionoflawsorregulations.

• Stripping Costs in the Production Phase of a Surface Mine

Clarifiestherequirementsforaccountingforstrippingcostsassociatedwithwasteremovalinsurfacemining,includingwhenproductionstrippingcostsshouldberecognisedasanasset,howtheassetisinitiallyrecognised,andsubsequentmeasurement.

TheInterpretationrequiresstrippingactivitycostswhichprovideimprovedaccesstoorearerecognisedasanon-

current‘strippingactivityasset’whencertaincriteriaaremet.Thestrippingactivityassetisdepreciatedoramortisedonasystematicbasis,overtheexpectedusefullifeoftheidentifiedcomponentoftheorebodythatbecomesmoreaccessibleasaresultofthestrippingactivity,usingtheunitsofproductionmethodunlessanothermethodismoreappropriate.

• IFRIC 21 Levies

Providesguidanceonwhentorecognisealiabilityforalevyimposedbyagovernment,bothforleviesthatareaccountedforinaccordancewithIAS37Provisions,ContingentLiabilitiesandContingentAssetsandthosewherethetimingandamountofthelevyiscertain.

TheInterpretationidentifiestheobligatingeventfortherecognitionofaliabilityastheactivitythattriggersthepaymentofthelevyinaccordancewiththerelevantlegislation.Itprovidesthefollowingguidanceonrecognitionofaliabilitytopaylevies:


b) Application of new and revised International Financial Reporting Standards (IFRSs) (cont’d)






• Theliabilityisrecognisedprogressivelyiftheobligatingeventoccursoveraperiodoftime• Ifanobligationistriggeredonreachingaminimumthreshold,theliabilityisrecognisedwhenthatminimum

thresholdisreached.

iv) Early adoption of standards

Thecompanydidnotearly-adoptanyneworamendedstandardsin2013.

Basis of preparation

Thefinancialstatementshavebeenpreparedonthehistoricalcostbasisofaccountingasmodifiedtoincludetherevaluationofcertainassets.

Theprincipalaccountingpoliciesadoptedinthepreparationofthesefinancialstatementsremainunchangedfromthepreviousyearandaresetoutbelow:

Revenue recognition

(i) Saleofgoods

Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivable.Revenueisreducedforestimatedcustomerreturns,rebatesandothersimilarallowances.

Revenuefromthesaleofsugar,molasses,waterandethanolisrecognisedwhenallthefollowingconditionsaresatisfiedandarestatednetofValueAddedTax,SugarDevelopmentLevy,excisedutyanddiscounts:

• thecompanyhastransferredtothebuyerthesignificantrisksandrewardsofownershipofthegoods;• thecompanyretainsneithercontinuingmanagerialinvolvementtothedegreeusuallyassociatedwith

ownershipnoreffectivecontroloverthegoodssold;• theamountofrevenuecanbemeasuredreliably;• itisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtotheentity;and• thecostsincurredortobeincurredinrespectofthetransactioncanbemeasuredreliably.

SugarDevelopmentLevydoesnotapplytoexportsugarandmolassessales.ValueAddedTaxdoesnotapplytoexportsugarsalesaswellassalestoexemptedentities. (i) Sale of electricity

Revenuefromelectricitysalesisrecognisedbasedonkilowatthours(KWH)ofpowerexportedtothenationalgridandcapacitychargesasprovidedforunderaPowerPurchaseAgreement(PPA)withtheKenyaPowerCompanyLimited.

(ii) Interest income

Interestincomeisrecognisedwhenitisprobablethattheeconomicbenefitswillflowtothecompanyandtheamountofrevenuecanbemeasuredreliably.Interestincomeisaccruedonatimebasis,byreferenceto


b) Application of new and revised International Financial Reporting Standards (IFRSs) (cont’d)




theprincipaloutstandingandattheeffectiveinterestrateapplicable,whichistheratethatexactlydiscountsestimatedfuturecashreceiptsthroughtheexpectedlifeofthefinancialassettothatasset’snetcarryingamountoninitialrecognition.

(iii) Other income

Allotherincomeearnedbythecompanyisrecognisedontheaccrualsbasis.

Foreign currencies

TransactionsincurrenciesotherthantheKenyaShillingaretranslatedattheratesofexchangeprevailingonthedatesofthetransactions.Attheendofeachreportingperiod,monetaryassetsandliabilitiesthataredenominatedinforeigncurrenciesaretranslatedattheratesprevailingattheendofthereportingperiod.Gainsandlossesarisingontranslationareincludedinprofitorlossfortheperiod.

Exchangedifferencesonmonetaryitemsarerecognisedinprofitorlossintheperiodinwhichtheyariseexceptforexchangedifferencesonforeigncurrencyborrowingsrelatingtoassetsunderconstructionforfutureproductiveuse,whichareincludedinthecostofthoseassetswhentheyareregardedasanadjustmenttointerestcostsonthoseforeigncurrencyborrowings.

Borrowing costs

Borrowingcostsdirectlyattributabletotheacquisition,constructionorproductionofqualifyingassets,thesebeingassetsthatnecessarilytakeasubstantialperiodoftimetogetreadyfortheirintendeduse,areaddedtothecostofthoseassets,untilsuchtimeastheassetsaresubstantiallyreadyfortheirintendeduse.

Allotherborrowingcostsarerecognisedinprofitorlossintheperiodinwhichtheyareincurred.

Deferred grant income

Grantsrelatedtoacquisitionofequipmentareaccountedforasdeferredincomeandarerecognisedthroughprofitorlossonasystematicbasisovertheusefullifeoftheequipment.

Taxation

Incometaxationexpenserepresentsthesumofcurrenttaxationanddeferredtaxation.

Currenttaxationisprovidedonthebasisoftheresultsfortheyearasshowninthefinancialstatements,adjustedinaccordancewiththetaxlegislation.

Deferredincometaxationisprovided,usingtheliabilitymethod,foralltemporarydifferencesarisingbetweenthetaxbasesofassetsandliabilitiesandtheircarryingvaluesforfinancialreportingpurposes.Currentlyenactedtaxratesareusedtodeterminedeferredincometaxation.

Property, plant and equipment

Property,plantandequipmentareinitiallyrecordedatcost.Allproperty,plantandequipmentexceptmotorvehiclesaresubsequentlyshownattheirrevaluedamountsbasedonvaluationsbyexternalindependentvaluers,lessaccumulateddepreciationandany


Revenue recognition (cont’d)



accumulatedimpairmentlosses.Valuationsaredonecarriedoutbyindependentprofessionalvaluers.Thebasisofthevaluationisopenmarketvalue.

Revaluationsareperformedwithsufficientregularitysuchthatthecarryingamountdoesnotdifferfromthatwhenwouldbedeterminedusingfairvaluesattheendofthereportingperiod

Gainsandlossesondisposalofproperty,plantandequipmentaredeterminedbyreferencetotheircarryingamountsandaretakenintoaccountindeterminingtheprofitbeforetaxation.Ondisposalofrevaluedassets,amountsintherevaluationsurplusrelatingtothatassetaretransferredtoretainedearnings.

Thecarryingvaluesofproperty,plantandequipmentarereviewedannuallyandadjustedforimpairmentwhereitisconsiderednecessary.

Anyrevaluationincreasearisingontherevaluationisrecognisedinothercomprehensiveincome,excepttotheextentthatitreversesarevaluationdecreaseforthesameassetpreviouslyrecognisedinprofitorloss,inwhichcasetheincreaseiscreditedtoprofitorlosstotheextentofthedecreasepreviouslyexpensed.Adecreaseinthecarryingamountarisingontherevaluationofsuchproperty,plantandequipmentisrecognisedinprofitorlosstotheextentthatitexceedsthebalance,ifany,heldinthepropertyrevaluationreserverelatingtoapreviousrevaluationofthatasset.

Depreciation

Depreciationiscalculatedonthestraight-linemethodtowriteoffthecostortherevaluedamountofeachassettoitsestimatedresidualvalueoveritsestimatedusefullife.Theannualratesusedare:

Landdevelopment 2½% Buildings 2½%-5% Factoryplantandmachinery 5%-10% Heavymobilemachinery 12½%-25% Motorvehicles 20%-331/3% Otherequipmentandfixtures 12½%-331/3%

Theannualdepreciationontherevaluationsurpluselementofproperty,plantandequipmentistransferredfromtherevaluationsurplustoretainedearnings.

Intangible assets

Computer software

Intangibleassetscomprisethecostofacquiredcomputersoftwareprogrammes.Expenditureonacquiredcomputersoftwareprogrammesiscapitalisedandamortisedusingthestraight-linemethodovertheirestimatedusefullives,generallynotexceedingthreeyears.Thecarryingamountofintangibleassetsisreviewedannuallyandadjustedforanyimpairmentlosses.Intangibleassetsarenotrevalued.

Research and development expenditure

Expenditureonresearchactivitiesisrecognisedasanexpenseintheperiodinwhichitisincurred.Aninternallygeneratedintangibleassetarisingfromdevelopment(orfromthedevelopmentalphaseofaninternalproject)isrecognisedifandonlyif,allofthefollowinghavebeendemonstrated:


Property, plant and equipment (cont’d)

• thetechnicalfeasibilityofcompletingtheintangibleassetsothatitwillbeavailableforuseorsale;• theintentiontocompletetheintangibleassetanduseorsellit;• theabilitytouseorselltheintangibleasset;• howtheintangibleassetwillgenerateprobablefutureeconomicbenefits;• theavailabilityofadequatetechnical,financialandotherresourcestocompletethedevelopmentandtouseorsellthe

intangibleasset;and• theabilitytomeasurereliablytheexpenditureattributabletotheintangibleassetduringitsdevelopment.

Theamountinitiallyrecognisedforaninternally-generatedintangibleassetisthesumoftheexpenditureincurredfromthedatewhentheintangibleassetfirstmeetsrecognitioncriterialistedabove.Wherenointernally-generatedintangibleassetcanberecognised,developmentexpenditureischargedthroughprofitorlossintheperiodinwhichitisincurred.

Inventories

Finishedsugar,molasses,waterandethanolinventoriesarestatedatthelowerofproductioncostandnetrealisablevalue.Productioncostcomprisesexpendituredirectlyincurredinthemanufacturingprocessandanallocationofnormalproductionoverheadsattributabletotheprocess.Netrealisablevaluerepresentstheestimatedsellingpricelessallestimatedcostsofcompletionandtheestimatedcostsnecessarytomakethesale.

Spares,fertilisers,chemicalsandotherconsumablestoresarestatedatcostnetofprovisionsforimpairmentwhereapplicable.Costiscalculatedontheweightedaveragecostbasisandincludesthepurchaseprice,importdutiesandothertaxes(otherthanthosesubsequentlyrecoverablebythecompanyfromthetaxationauthorities),andtransport,handlingandothercostsdirectlyattributabletotheacquisitionoftheitem.

Biological assets

Biologicalassets(caneplantations)andagriculturalproduce(harvestedcane)arestatedattheirfairvalueslessestimatedcoststosale.

Thefairvalueofgrowingcaneisdeterminedbasedonthepresentvalueofexpectednetcashflows.Thefairvalueofharvestedcaneisdeterminedbasedonthepricesofcaneexistinginthemarketlessestimatedpointofsalecosts

Immaturegrowingcaneisvaluedatcost.

Non-current assets held for sale

Non-currentassetsareclassifiedasheldforsaleiftheircarryingamountwillbeprincipallyrecoveredthroughasaletransactionratherthanthroughcontinuinguse.Thisconditionisregardedasmetonlywhenthesaleishighlyprobableandtheassetisavailableforsaleinitspresentcondition.Managementmustbecommittedtothesale,whichshouldbeexpectedtoqualifyforrecognitionasacompletedsalewithinoneyearfromthedateofclassification.Non-currentassetsclassifiedasheldforsalearemeasuredattheloweroftheasset’spreviouscarryingamountandthefairvaluelesscoststosell.

Leases

Leasesareclassifiedasfinanceleaseswheneverthetermsoftheleasetransfersubstantiallyalltherisksandrewardsofownershiptothecompanyasalessee.Allotherleasesareclassifiedasoperatingleases.


Intangible assets (cont’d)

Research and development expenditure (cont’d)





Company as a lessor

Rentalincomefromoperatingleasesisrecognizedonthestraightlinebasisoverthetermoftherelevantlease.

Company as a lessee

Rentalspayableunderoperatingleasesarechargedtoprofitorlossonthestraight-linebasisoverthetermoftherelevantlease.Anypaymentrequiredtobemadetothelessorbywayofpenalty,forterminationofleasesbeforetheexpiryoftheleaseperiod,isrecognisedintheyearinwhichterminationtakesplace.

Paymentstoacquireleaseholdinterestsinlandaretreatedasprepaidoperatingleaserentalsandamortisedovertheperiodofthelease.

Cash and cash equivalents

Forthepurposeofthestatementofcashflows,cashequivalentsincludeshorttermliquidinvestmentswhicharereadilyconvertibletoknownamountsofcashandwhichwerewithinthreemonthsofmaturitywhenacquired;lessadvancesfrombanksrepayablewithinthreemonthsfromthedateoftheadvance.

Financial instruments

Financialassetsandfinancialliabilitiesarerecognisedinthecompany’sstatementoffinancialpositionwhenthecompanybecomesapartytothecontractualprovisionsoftheinstrument.

Financial assets

Classification

Thecompanyclassifiesitsfinancialassetsintothefollowingcategories:Financialassetsatfairvaluethroughprofitorloss;loansandreceivables;held-to-maturityassets;and,available-for-saleassets.Managementdeterminestheappropriateclassificationofitsfinancialsassetsatinitialrecognition.

Financialassetsatfairvaluethroughprofitorloss

Thiscategoryhastwosub-categories:Financialassetsheldfortradingandthosedesignatedatfairvaluethroughprofitorlossatinception.Afinancialassetisclassifiedinthiscategoryifacquiredprincipallyforthepurposeofsellingintheshorttermorifsodesignatedbymanagement.Thecompany’sinvestmentinquotedequitysharesfallsunderthiscategory.

Loans and receivables

Loansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquotedinanactivemarket.Theyarisewhenthecompanyprovidesmoney,goodsorservicesdirectlytoadebtorwithnointentionoftradingthereceivable.Baddebtsarewrittenoffwhenallreasonablestepstorecoverthemhavefailed.ObjectiveevidenceofimpairmentforaportfolioofreceivablescouldincludetheCompany’spastexperienceofcollectingpayments,anincreaseinnumberofdelayedpaymentsintheportfoliopastaveragecreditperiodaswellasobservablechangesinnationaloreconomicconditionsthatcorrelatewithdefaultonreceivables.Thecompany’stradeandotherreceivablesaswellascashandbankbalancesfallunderthiscategory.


Leases (cont’d)

Held to maturity

Held-to-maturityinvestmentsarenon-derivativefinancialassetswithfixedordeterminablepaymentsandfixedmaturitiesthatmanagementhasthepositiveintentionandabilitytoholdtomaturity.Whereasaleoccursotherthananinsignificantamountofheld-to-maturityassets,theentirecategorywouldbetaintedandclassifiedasavailable-for-sale.Thecollateralandthetermdepositsfallunderthiscategory.

Available-for-salefinancialassets

Thiscategoryrepresentsfinancialassetsthatarenot(a)financialassetsatfairvaluethroughprofitorloss,(b)loansandreceivables,or(c)financialassetsheld-to-maturity.

Recognition

Financialassetsareinitiallyrecognisedatfairvalueplusdirectlyattributabletransactioncostsforallfinancialassetsnotcarriedatfairvaluethroughprofitorloss.

Available-for-salefinancialassetsandfinancialassetsatfairvaluethroughprofitorlossaresubsequentlycarriedatfairvalue.Loansandreceivablesandheld-to-maturityinvestmentsarecarriedatamortisedcostusingtheeffectiveinterestmethod.Gainsandlossesarisingfromchangesinthefairvalueof“financialassetsatfairvaluethroughprofitorloss”aredealtwithinprofitorlossintheperiodinwhichtheyarise.Gainsandlossesarisingfromchangesinthefairvalueofavailable-for-salefinancialassetsarerecognisedinothercomprehensiveincomeandaccumulatedinequity,untilthefinancialassetisderecognisedorimpaired,atwhichtimethecumulativegainorlosspreviouslyrecognisedinequityisrecognisedinprofitorloss.

Derecognition

Financialassetsarederecognisedwhentherightstoreceivecashflowsfromthefinancialassetshaveexpiredorwherethecompanyhastransferredsubstantiallyallrisksandrewardsofownership.Ifthecompanyneithertransfersnorretainsalltherisksandrewards

Ifthecompanyneithertransfersnorretainssubstantiallyalltherisksandrewardsofownershipandcontinuestocontrolthetransferredasset,thecompanyrecognisesitsretainedinterestintheassetandanassociatedliabilityforamountsitmayhavetopay.Ifthecompanyretainssubstantiallyalltherisksandrewardsofownershipofatransferredfinancialasset,thecompanycontinuestorecognisethefinancialassetandalsorecognisesacollateralisedborrowingfortheproceedsreceived.

Financial liabilities

Financialliabilitiesareclassifiedaseitherfinancialliabilities‘atfairvaluethroughprofitorloss’or‘otherfinancialliabilities’.Financialliabilitiesareinitiallymeasuredatfairvalueplus,inthecaseofafinancialliabilitynotatfairvaluethroughprofitorloss,transactioncoststhataredirectlyattributabletotheacquisitionorissueofthefinancialliability.Financialliabilitiesarederecognisedwhentheobligationspecifiedinthecontractisdischargedorcancelledorexpire.

Otherfinancialliabilities

Otherfinancialliabilities,includingborrowingsandtradeandotherpayables,areinitiallymeasuredatfairvalue,netofdirectlyattributabletransactioncosts.Otherfinancialliabilitiesaresubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod,withinterestexpenserecognisedonaneffectiveyieldbasis.Thecompany’skeyotherfinancialliabilitiesare:


Financial assets (cont’d)

Classification(cont’d





Bank borrowings

Interestbearingloansandoverdraftsarerecordedattheproceedsreceived,netofdirectcosts.Financecharges,includingpremiumspayableonsettlementorredemption,areaccountedforontheaccrualbasisandareaddedtothecarryingamountoftheinstrumenttotheextentthattheyarenotsettledintheperiodinwhichtheyarise.

Trade and other payables

Tradeandotherpayablesarestatedattheirnominalvaluewhichapproximatesamortisedcost.

Impairment

Attheendofeachreportingperiod,thecompanyreviewsthecarryingamountsofitsfinancialassetstodeterminewhetherthereisanyindicationthatthoseassetshavesufferedanimpairmentloss.Ifanysuchindicationexists,theasset’srecoverableamountisestimatedandanimpairmentlossisrecognisedthroughprofitorlosswheneverthecarryingamountoftheassetexceedsitsrecoverableamount.

Whereanimpairmentlosssubsequentlyreverses,thecarryingamountoftheassetisincreasedtotherevisedestimateofitsrecoverableamount,totheextentthattheincreasedcarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognisedfortheassetinprioryears.Areversalofanimpairmentlossisrecognisedimmediatelythroughprofitorloss,unlesstherelevantassetiscarriedatarevaluedamount,inwhichcasethereversaloftheimpairmentlossistreatedasarevaluationincrease.

Retirement benefits obligations

Definedbenefitscheme

Thecompanyoperatesadefinedbenefitpostemploymentschemeforeligiblenonunionisableemployees.Theschemeisfundedbycontributionsfrombothemployerandemployee.Theassetsoftheschemeareheldandadministeredindependentlyofthecompany’sassets.

ThecostofprovidingbenefitsforthedefinedbenefitschemeisdeterminedusingtheProjectedUnitCreditMethod,withactuarialvaluationsbeingcarriedouteverythreeyears.Actuarialgainsandlossesthatexceed10percentofthegreaterofthepresentvalueofthecompany’sdefinedbenefitobligationandthefairvalueofplanassetsasattheendoftheprioryearareamortisedovertheexpectedaverageremainingworkinglivesoftheparticipatingemployees.Pastservicecostisrecognisedimmediatelytotheextentthatthebenefitsarealreadyvested,andotherwiseisamortisedonastraight-linebasisovertheaverageperioduntilthebenefitsbecomevested.

Thenetretirementbenefitobligationrepresentsthepresentvalueofthedefinedbenefitobligationasadjustedforunrecognisedactuarialgainsandlossesandunrecognisedpastservicecost,andasreducedbythefairvalueofplanassets.Anyassetresultingfromthiscalculationislimitedtounrecognisedactuariallossesandpastservicecost,plusthepresentvalueofavailablerefundsandreductionsinfuturecontributionstotheplan.

Definedcontributionschemes Thecompanyoperatesadefinedcontributionprovidentfundforeligibleunionisableemployees.Thefundisadministered

independentlyofthecompany’sassets.Itisfundedbycontributionsfromthecompanyandemployees.Thecompanyhasnolegalorconstructiveobligationstopayfurthercontributionsifthefunddoesnotholdsufficientassetstopayallemployeesthebenefitsrelatingtoemployeeserviceinthecurrentandpriorperiods.Thecompany’scontributionstothefundarechargedtoprofitorlossintheyeartowhichtheyrelate.


Financial liabilities (cont’d)

ThecompanyanditsemployeesalsocontributetothestatutoryNationalSocialSecurityFund,whichisadefinedcontributionscheme.Thecompany’sobligationislimitedtoaspecifiedcontributionperemployeepermonth.Currently,thecontributionislimitedtoamaximumofSh200peremployeepermonth.Thecompany’scontributionsarechargedthroughprofitorlossintheyeartowhichtheyrelate.

Contract gratuity

Thecompanyhasfixedtermservicecontractswithsomeoftheemployees.Acontractgratuityof25%ofthebasicpayearnedoverthecontractperiodispaidattheendofthecontract.Themonetaryliabilityisaccruedattheendofeachyearbasedonthecompletedperiodofservice.

Employee benefits

Bonus scheme

Thecompanyoperatesabonusschemeforitsemployees.Thebonusisrecogniseduponattainmentofsetannualperformancetargetsandisrecognisedintheperiodinwhichtheserviceswererendered.

Restructuring and rationalisation provisions

Restructuringandrationalisationprovisionsmainlycompriseemployeeterminationpaymentsandarerecognisedintheperiodinwhichthecompanybecomeslegallyorconstructivelycommittedtopayment.

Provision for staff leave pay

Aprovisionismadetorecognisestaffentitlementsinrespectofannualleavenottakenasattheendofthefinancialyear.

Dividends

Dividendsonordinarysharesarechargedtoequityintheperiodinwhichtheyaredeclaredandappropriatelyauthorized.

Comparatives

Wherenecessary,comparativefigureshavebeenadjustedtoconformtochangesinpresentationinthecurrentyear.


Retirement benefits obligations (cont’d)

Definedcontributionschemes(cont’d)





2 CRITICAL ACCOUNTINg JUDgEMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY IN APPLYINg THE ENTITY’S ACCOUNTINg POLICIES

Intheprocessofapplyingthecompany’saccountingpolicies,managementisrequiredtomakejudgements,estimatesand

assumptionsaboutthecarryingamountsofassetsandliabilitiesthatarenotreadilyapparentfromothersources.Thejudgements,

estimatesandassociatedassumptionsarebasedonhistoricalexperienceandotherfactors,includingexpectationsoffutureeventsthat

arebelievedtobereasonableunderthecircumstances.Actualresultsmaydifferfromtheseestimates.

Theestimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognisedinthe

periodinwhichtheestimateisrevisediftherevisiononlyaffectsthatperiodorintheperiodoftherevisionandfutureperiodsifthe

revisionaffectsbothcurrentandfutureperiods.Thesearedealtwithbelow:

(i) Critical judgements in applying the company’s accounting policies

Held to maturity investments

ThecompanyfollowstheguidanceofIAS39onclassifyingnon-derivativefinancialassetswithfixedordeterminablepaymentsand

fixedmaturityasheld-to-maturityfinancialassets.Thisclassificationrequiressignificantjudgement.Inmakingthisjudgement,the

companyevaluatesitsintentionandabilitytoholdsuchinvestmentstomaturity.Ifthecompanyfailstokeeptheseassetstomaturity,

forexamplesellingamorethaninsignificantamountclosetomaturity,itwillberequiredtoclassifytheentireclassasavailable-for-

sale.Theassetswouldthereforehavetobemeasuredatfairvalueandnotamortisedcostwiththedifferencearisingfromthischange

invaluationbeingacorrespondingentrytoafairvaluereserveinshareholders’equity.

(ii) Key sources of estimation and uncertainty

Biological assets

Indeterminingthefairvalueofbiologicalassets,managementusesestimatesbasedonhistoricaldatarelatingtoyieldsandpricesof

sugar.Themethodologyandassumptionsusedforestimatingboththeamountandtimingoffuturecashflowsarereviewedregularly

toreducepotentialdifferencesbetweenestimatesandactualexperience.Thesignificantassumptionsusedaresetoutinnote16.

Property, plant and equipment and intangible assets

Criticalestimatesaremadebythemanagementindeterminingtheusefullivesofproperty,plantandequipmentandintangibleassets.

Thisisthebasisonwhichthedepreciationandamortizationratesappliedonproperty,plantandequipmentandintangibleassets

respectivelyaredetermined.

Impairment

Determiningwhetherassetsareimpairedrequiresanestimationofthevalueoftheassets.

Contingent liabilities

Thecompanyisexposedtovariouscontingentliabilitiesinthenormalcourseofbusiness.Managementevaluatesthestatusofthese

exposuresonaregularbasistoassesstheprobabilityofthecompanyincurringrelatedliabilities.However,provisionsareonlymadein

thefinancialstatementswhere,basedonthemanagement’sevaluation,apresentobligationhasbeenestablished.



b) Segment revenues and results, assets and liabilities

Sugar Energy Ethanol Water Total Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 At30June2013 Revenue from customers 11,293,595 305,360 330,505 28,364 11,957,823 Intersegmentsales (83,179) 153,000 (69,821) - -

11,210,416 458,360 260,684 28,364 11,957,823

Cost of sales 9,516,891 439,490 316,028 123,385 10,395,794

Fairvaluechangesonbiologicalassets (13,781) - - - (13,781)

Profitbeforetax (1,617,975) (269,884) (171,078) (177,062) (2,235,999)

Financecosts (357,240) (119,842) (252,779) - (729,861)

Financeincome 380,387 1,139 - - 381,526

Depreciationandamortization (652,929) (264,864) (248,129) (23,455) (1,189,377) SegmentEBITDA (227,419) 115,961 329,830 (153,607) 64,765

Segment assets 16,481,455 5,371,264 5,037,294 438,460 27,328,473

Segmentliabilities 5,323,136 3,095,684 5,306,882 615,522 14,341,224

3 SEgMENTAL INFORMATION

a) Products and services from which reportable segments derive their revenues

Informationreportedtothecompany’schiefoperatingdecisionmaker(theManagingDirector)forthepurposesofresourceallocationandassessmentofsegmentperformanceisfocussedontheprincipalactivitiesofthecompany.

Thecompanydefinesitsreportableoperatingsegmentsonthebasisofproductsasindicatedbelow;

• Sugarsegmentwhichprimarilyproducesandsellssugar.• Energysegmentwhichgenerateselectricityfrombagasse(abyproductofsugarproduction)forsaletotheKenya

PowerandLightingCompanyLimited.• Ethanolsegmentwhichprimarilyproducesandsellsethanol.• Watersegmentwhichbottlesdrinkingwaterforsale





b) Segment revenues and results, assets and liabilities

Sugar Energy Ethanol Total Shs’000 Shs’000 Shs’000 Shs’000 At30June2012 Revenue from customers 15,105,886 435,300 1,500 15,542,686 Intersegmentsales (151,070) 151,070 - -

14,954,816 586,370 1,500 15,542,686

Costofsales (10,728,561) (302,084)(30,082) (11,060,727)

Fairvaluechangesonbiologicalassets 5,678 - - 5,678

Profitbeforetax 1,550,879 241,839(28,689) 1,764,029

Financecosts (262,229) (87,969) (185,550) (535,748) Financeincome 396,136 1,132 - 397,268 Depreciationandamortization 641,741 262,055 19,990 923,786 SegmentEBITDA 1,567,503 68,885 136,871 1,773,259

Segment assets 17,072,717 5,275,938 5,051,458 27,400,113

Segmentliabilities 4,272,344 1,615,824 2,760,765 8,648,933

Revenuereportedaboverepresentsrevenuegeneratedfromexternalcustomers,exceptfortheintersegmentsalesidentifiedinyear2013.

Segmentliabilitiesrepresentlongtermloansandcurrentliabilitiesonly.

c) Information on major customers

IncludedinrevenuearisingfromsalesofsugarofShs11.15billion(2012:Shs14.82billion),isrevenueofapproximatelyShs2.09billion(2012:Shs3.1billion)whicharosefromsalestothecompany’slargestcustomer.

TheenergyrevenuesolelyrelatestosalestoKenyaPowerandLightingCompanyLimited(KPLC).ThecompanyhasapowerpurchaseagreementwithKPLCwhichstipulatesthatthepowergeneratedbythecompanyshallbepurchasedbyKPLCasperagreedratesandoperationalparameters

d) Other information

Theaccountingpoliciesforthereportablesegmentsarethesameasthecompany’saccountingpolicydescribedinnote1.

AlltheassetsofthecompanyarelocatedinKenya.

3 SEgMENTAL INFORMATION (cont’d)



2013 2012 Shs’000 Shs’000

4 REVENUE ANALYSIS

Gross sales 14,936,100 18,702,674

Less: ValueAddedTax(VAT) (2,049,620) (2,564,669) SugarDevelopmentLevy(SDL) (446,245) (591,719) ExciseDuty (482,412) (3,600)

(2,978,277) (3,159,988)

Net sales 11,957,823 15,542,686

Net sales analysed as follows:

Sugar sales 11,156,123 14,824,660 Molasses sales 137,471 281,225

11,293,594 15,105,885 Electricitysales 305,360 435,301 Ethanol sales 330,505 1,500 Water sales 28,364 ‑

11,957,823 15,542,686

5(a) FINANCE INCOME

Interestincome: Onfarmersbalances 380,387 396,136 Ondepositswithfinancialinstitutionsheldtomaturity 785 4,598 On staff loans 12,025 9,157 Oncollateraldepositsheldtomaturity 1,139 1,132

394,336 411,023

Theinterestincomeonfarmers’balancesrelatestotheinterestthecompanychargesfarmersinrelationtocreditadvancedforfarminputs.Thecompanyrecoverstheseamountsfromtheamountspayabletofarmersonharvestedcane.





2013 2012

Shs’000 Shs’000

5(b) FINANCE COSTS

Interestexpense:

On loans 477,082 315,603

Onbankoverdrafts 252,779 220,145

729,861 535,748

Less:Amountsincludedincostofqualifyingassets - (337,965)

Totalinterestexpense 729,861 197,783

Otherfinancecharges 63,710 10,569

Netforeignexchangegains (68,583) (66,714)

724,988 141,638

InterestcostsamountingtoShNil(2012–Shs337,965,000)werecapitalisedandincludedinthecostofqualifyingassets(Ethanol

andWaterprojects)inaccordancewithIAS23‘BorrowingCosts’whichallowsborrowingcoststhataredirectlyattributabletothe

acquisition,constructionorproductionofaqualifyingassettoformpartofthecostofthatasset.

2013 2012

Shs’000 Shs’000

6 (LOSS)/PROFIT BEFORE TAXATION

(Loss)/Profitbeforetaxationisarrivedatafter:

Charging:

Employmentcosts(note7) 2,399,195 1,997,849

Depreciationofproperty,plantandequipment(note11) 1,167,310 912,108

Amortisationofintangibleassets(note12) 22,067 11,678

Operatingleaserentals(note30) 17,011 19,899

Directors’emoluments-fees 4,500 5,500

‑ other 49,346 78,525

Auditors’remuneration 6,741 6,300

Badanddoubtfuldebts 93,775 64,064

(Loss)/profitondisposalofnon-currentassetsheldforsale (122,296) 175,008

Writeoffoffixedassets(note11) 58,710 80,509

Crediting:

Amortisationofgrantincome(note25) - 11,800

Reductioninprovisionforobsoletestock - 31,005

Gainonrevaluationofquotedequityinvestmentsatfair

valuethroughprofitorloss(note20) 8,866 9,973

Gainondisposalofmotorvehicle - 517



2013 2012

Shs’000 Shs’000

7 EMPLOYMENT COSTS

Salariesandallowances 2,162,954 1,804,764

Pension-definedbenefitscheme 69,921 60,918

Providentfund 41,020 40,386

Staffinsurance 87,252 75,775

Staffgratuityprovision 14,361 10,422

Pension-statutorydefinedcontributionscheme 4,959 4,860

Provisionforleavepay 18,728 724

2,399,195 1,997,849

8 TAXATION

(a) Taxation charge/(credit)

Currenttaxationbasedontheadjustedprofit

fortheyearat30%-currentyear 17,739 51,305

Totalcurrenttaxationcharge 17,739 51,305

Deferredtaxation(credit)/charge

-currentyear (584,022) (319,330)

-prioryearunder/(over)provision - 19,376

Totaldeferredtaxation(credit)/charge(note23) (584,022) (299,954)

(566,283) (248,650)

Asat30June2013,thecompanyhadaccumulatedtaxlossesamountingtoShs7,990,475,997(2012:Shs6,785,123,000).

(b) Reconciliation of expected tax based on accounting

profit to taxation charge

Accounting(loss)/profitbeforetaxation (2,235,999) 1,764,029

Taxattheapplicablerateof30% (670,800) 529,209

Taxeffectofnondeductibleexpenses 226,161 81,002

Taxeffectofnontaxableincome (121,644) (15,017)

Taxeffectofexcessinvestmentdeduction - (863,219)

Prioryearunder/(over)provisionofdeferredtaxation - 19,375

(566,283) (248,650)





2013 2012

Shs’000 Shs’000

8 TAXATION (cont’d)

(c) Taxation recoverable

Atbeginningoftheyear (200,214) (250,109) Paidintheyear (627) (1,410) Chargefortheyear 17,739 51,305

Atendofyear (183,102) (200,214)

9 EARNINgS PER SHARE – BASIC & DILUTED

Earningspersharearecalculatedbydividingthe(loss)/profitfortheyearattributabletoshareholdersbythenumberofordinarysharesinissueduringtheyear.

2013 2012

(Loss)/profitfortheyear(Shs’000) (1,669,716) 2,012,679

Numberofordinaryshares(thousands) 1,530,000 1,530,000

(Loss)earningspershare Basic&diluted(Shs) (1.09) 1.32

Therewerenopotentiallydilutivesharesoutstandingateither30June2013or30June2012.

10 DIVIDENDS

(a) Dividendspershare

Thedirectorsdonotrecommendthepaymentofadividendfortheyear(2012–Shs0.50)

(b) Themovementinthedividendspayableaccountisasfollows:

2013 2012

Shs’000 Shs’000

Atbeginningoftheyear 299,437 282,960 Finaldividenddeclared–2012/2011 765,000 765,000

1,064,437 1,047,960

Dividendpaid (608,062) (748,523)

Attheendoftheyear 456,375 299,437

Theunclaimeddividendsrelatesubstantiallytodividendspayabletoshareholderswhohadunresolvedsharecertificateissuesattheendofthereportingperiod.ThesesharesareheldintrustbyKanoutiTrustees.Otheramountsrelatetoshareholdersholdingfewshareswhohavenotcollectedtheirchequesduetoinsignificantamountsofdividendsinvolvedandhaveaccumulatedovertime.



Factory Heavy Other Capital Land plantand mobile Motor equipment work-in- development Buildings machinery machinery vehicles andfixtures progress Total Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000

COST OR VALUATION

At1July2011 1,262,649 3,049,803 9,197,440 329,269 332,682 678,202 2,333,071 17,183,116

Additions 39,607 25,938 110,399 - 56,446 46,744 4,113,005 4,392,139Disposals - - - - (3,060) - - (3,060)Transfers to non‑current assets heldforsale(note21) - - (317,538) (23,560) (27,658) (9,001) - (377,757)Transfersfromcapitalworkinprogress 16,288 309,424 5,356,686 25,925 - 16,273(5,724,596) -Transferstointangibleassets - - - - - - (17,094) (17,094)Transfersfrominventories(note15) - - 291,058 - - - - 291,058Criticalspareswrittenoff - - (95,371) - - - - (95,371)

At30June2012 1,318,544 3,385,165 14,542,674 331,634 358,410 732,218 704,386 21,373,031

At1July2012 1,318,544 3,385,165 14,542,674 331,634 358,410 732,218 704,386 21,373,031

Additions 64,229 1,367 144,265 106,264 12,355 26,594 860,952 1,216,026Disposals - - - - - - - -Transfers to non‑current assets heldforsale(note21) - (2,430) (10,184) (7,395) (26,629) (31,564) (57,848) (136,050)Transfersfromcapitalworkinprogress 2,701 237,046 405,866 - - 205,110 (850,723) -Transferstointangibleassets - - - - - - (111,247) (111,247)Capitalworkinprogresswritenoff - - - - - - (58,710) (58,710)

At30June2013 1,385,474 3,621,148 15,082,621 430,503 344,136 932,358 486,810 22,283,050

COMPRISING

Cost 706,812 1,441,674 10,411,008 329,593 344,136 932,358 486,810 14,652,391Valuation–2011 678,662 2,179,474 4,671,613 100,910 - - - 7,630,659

1,385,474 3,621,148 15,082,621 430,503 344,136 932,358 486,810 22,283,050

11 PROPERTY, PLANT AND EQUIPMENT






Factory Heavy Other Capital Land plantand mobile Motor equipment work-in- development Buildings machinery machinery vehicles andfixtures progress Total Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000

DEPRECIATION

At1July2011 - - 14,185 - 267,401 485,790 - 767,376Chargefortheyear 38,519 143,127 599,483 42,470 24,248 64,261 - 912,108Transfers to non‑current assets heldforsale(note21) - - (60,258) (2,878) (27,658) (8,297) - (99,091)Eliminatedondisposal - - - - (3,060) - - (3,060)Eliminatedonassetwriteoff - - (14,862) - - - - (14,862)

At30June2012 38,519 143,127 538,548 39,592 260,931 541,754 - 1,562,471

At1July2012 38,519 143,127 538,548 39,592 260,931 541,754 - 1,562,471Chargefortheyear 38,918 151,244 821,546 51,134 30,028 74,440 - 1,167,310Transfers to non‑current assetsheldforsale(note21) - (132) (5,160) (1,078) (25,233) (30,210) - (61,813)Eliminatedondisposal - - - - - - - -Eliminatedonassetwriteoff - - - - - - - -

At30June2013 77,437 294,239 1,354,934 89,648 265,726 585,984 - 2,667,968

NET BOOK VALUE (valuation)

At30June2013 1,308,037 3,326,90913,727,687 340,855 78,410 346,374 486,810 19,615,082

At30June2012 1,280,025 3,242,03814,004,126 292,042 97,479 190,464 704,386 19,810,560

NET BOOK VALUE (Cost basis)

At30June2013 625,181 772,20912,526,656 265,044 77,055 328,653 486,810 15,081,608

At30June2012 727,648 1,036,07212,158,401 109,140 97,479 190,464 704,386 15,023,590

Propertyandfactory,plantandmachinerywererevaluedon30June2012,byTysonsLimited,RegisteredValuersandEstateAgents.Landde‑velopmentswererevaluedbasedonopenmarketvaluewhilethebasisfortheotherassetswasdepreciatedreplacementcost.

Thebalanceoncapitalworkinprogressmainlyrepresentsexpenditureonincompleteworksonthenewofficeblockthatwereinprogressattheendofthereportingperiod.ThetransfersfromcapitalworkinprogressmainlyrelatetotheexpenditureincurredfactoryequipmentthatwerecapitalisedduringtheyearatacostofSh850million(2012–Shs5.75million).

Allproperty,plantandequipmenthavebeenchargedtosecurebankingfacilitiesasdisclosedonnote26.

11 PROPERTY, PLANT AND EQUIPMENT (cont’d)


12 INTANgIBLE ASSETS Computer Development Capitalwork software costs inprogress Total Shs’000 Shs’000 Shs’000 Shs’000

At1July2011 208,972 135,969 - 344,941 Additions 15,080 29,375 - 44,455 Transfersfromproperty,plant andequipment 17,094 - - 17,094

At30June2012 241,146 165,344 - 406,490

At1July2012 241,146 165,344 - 406,490 Additions 19,893 - - 19,893 Transfersfromproperty,plant andequipment - - 111,247 111,247 Transfersfromcapitalworkinprogress 4,320 - (4,320) -

At30June2013 265,359 165,344 106,927 537,630

AMORTISATION

At1July2011 188,209 - - 188,209 Chargefortheyear 11,678 - - 11,678

At30June2012 199,887 - - 199,887

At1July2012 199,887 - - 199,887 Chargefortheyear 22,067 - - 22,067

At30June2013 221,954 - - 221,954

NET BOOK VALUE

At30June2013 43,405 165,344 106,927 315,676

At30June2012 41,259 165,344 - 206,603

Intangibleassetsrepresentcomputersoftwareanddevelopmentcosts.Capitalworkinprogressrelatestoongoingsoftwareupgrade.

11 PROPERTY, PLANT AND EQUIPMENT (cont’d)


Fully depreciated property, plant and equipment Normal annual Cost/valuation depreciation charge 2013 2012 2013 2012 Shs’000 Shs’000 Shs’000 Shs’000

Buildings 102,101 - 4,084 - Factoryplantandmachinery 84,137 63,196 4988 7,890 Heavymobilemachinery 3,187 106,539 398 15,200 Motorvehicles 247,462 217,739 52,358 46,572 Otherequipmentandfixtures 416,574 375,403 97,198 93,200

853,461 762,877 159,026 162,862




12 INTANgIBLE ASSETS (cont’d)

Developmentcostsrepresentconsultancy,sensitisationandenvironmentalimpactassessmentcostsincurredonthedevelopmentoftheTanaDeltaIntegratedSugarProjectinconjunctionwithTanaandAthiRiverDevelopmentAuthority(TARDA).Allexpenditureincurredontheresearchphaseofthisprojectwasexpensedwhenincurred.

TheamountsincurredaretobeconvertedtoequityinacompanytobeincorporatedtoruntheprojectandinwhichitisenvisagedthatMumiasSugarCompanyLimitedwillhavethemajorityshareholding.Thecompanyisintheprocessofidentifyingsuitableinvestorsandfinanciersfortheproject.Thedevelopmentcostsarenotamortisedastheyhaveanindefiniteusefullife.

At30June2013,intangibleassetswithacostofShs191,252,311(2012–Shs208,973,708)werefullyamortised.ThenormalannualamortisationchargeontheseassetswouldhavebeenShs63,744,395(2012–Shs69,650,937).

13 PREPAID OPERATINg LEASE RENTALS

The company owns 4,413.82 hectares of leasehold land. The land has been charged to secure banking facilities granted to thecompanyasdisclosedinnote26.Thedevelopmentwasvaluedon30June2012,byTysonsLimited,RegisteredValuersandEstateAgents,onopenmarketbasisatShs790,000,000.ThevalueofthelandisnotreflectedasprepaidoperatingleaserentalsasthelandwasallocatedtothecompanybytheGovernmentofKenyaatnopurchaseconsideration.Indoingthis,thecompanyhasappliedthealternativerecognitionmethodallowedbyIAS20‘AccountingforGovernmentGrantsandDisclosureofGovernmentAssistance’andaccountedforbothassetandgrantatanilamount.

2013 2012 Shs’000 Shs’000

14 NON CURRENT RECEIVABLES

Staffreceivables 241,387 227,156 Less:receivablewithinoneyear(includedundernote17) (83,692) (77,066)

Receivableafteroneyear(non-current) 157,695 150,090

Thecompanyoperatesacar loan scheme for its employeeswherebyeligibleemployeesaregiven loans toacquire cars for theirpersonaluse.Theloansarerepayablewithinamaximumperiodof60months.

IncludedinthestaffreceivablesbalancesarestaffcarloansamountingtoShs241,387,000(2012–Shs214,421,820)whicharesecuredbythevehiclesacquiredthroughtheloans.Theeffectiveinterestrateonstaffloansduringtheyearwas5%(2012-5%).

15 INVENTORIES 2013 2012 Shs’000 Shs’000

Sugar and molasses 1,245,532 33,716 Sugarinprocess 144,667 261,822 Ethanol 10,961 ‑ Water 7,946 ‑

1,409,106 295,538

Mechanicalandelectricalspares 1,051,485 909,493 Fertilisers,chemicalsandfuels 764 302,443 Otherconsumables 1,709 168,614

2,463,064 1,676,088





15 INVENTORIES (Cont’d)

Asdetailedinnote11,inventorieswithacarryingcostofShsNil(2012:Shs291,508,000)havesatisfiedthecriteriaforclassificationasplantandequipmentinaccordancewiththeprovisionsofIAS16andhavethereforebeentransferredtoproperty,plantandequipment.

ThecostofinventoriesrecognisedasanexpenseduringtheperiodwasShs8,926,742,000(2012:Shs8,798,968,000).

ThecostofinventoriesrecognisedasanexpensehasbeenreducedbyShsNil(2012:Shs31,005,000)inrespectofreversalofwrite-downsofinventorytonetrealisablevalue.

2013 2012 Shs’000 Shs’00016 BIOLOgICAL ASSETS

Atbeginningoftheyear 191,093 210,615 Additionsatcost 222,949 197,109 Decreaseduetoharvest (165,946) (154,262) Decreaseduetoimpairment (14,937) (68,047) 233,159 185,415

Lossarisingfromchangesinfairvalueattributabletophysicalchanges (16,594) (24,999) Gain/(loss)arisingfromchangesinfairvalueattributabletopricechanges 2,813 30,677 Fairvalue(loss)gainduringtheyear (13,781) 5,678 Carryingamountattheendoftheyear 219,378 191,093

Significantassumptionsmadeindeterminingthefairvaluesofbiologicalassetsandagriculturalproduceare:

• ThevaluationisbasedonamarketpriceofShs3,825pertonneofsugarcane(2012–Shs3,750).• Costofcaneattheageofsixmonthsandbelowapproximatefairvalue.Maturecanehasbeenstatedatfairvaluelesspoint

ofsalecosts.• Theestimatedsucrosecontentpertonneofmaturecane(polvalue)atvariousstagesofgrowthwillremainconstantat

between8.9%and13.1%dependingontheageofthecaneacrossthesugarbelt.

Asat30June2013,48%(2012–65%)oftheNucleusEstatelandundercanecovermeasuring1,614ha(2012–2,278ha)wasunderimmaturecane.Theremaining52%(2012–35%)estatelandmeasurin1,750ha(2012–1,208ha)wasundermaturecane.

Duringtheyear127,628tonnes(2012–166,455tonnes)ofcanewereharvestedfromtheestatewithafairvaluelessestimatedpointofsalesofSh404,989,547(2012-Sh530,178,657).

Indeterminingthepresentvalueofexpectednetcashflows,thecompanyhasnotdiscountedthecashflowsasstandingcanewillmaturewithinthenextreportingperiodandthereforetheimpactoftimevalueofmoneyonestimatedfuturecashflowsisnotsignificant.

ImpairmentlossrelatingtoNasewaNucleusEstateofSh20,511,812hasbeenfactoredinthevaluation.Thecompanyceased

farmingonNasewaNucleussincetheoperationswerecontinuouslyrunningintolossesasaresultofpersistentcanefires. Asat30June2013,thecompanyhadlodgedinsuranceclaimsofSh36,535,230(2012-Sh47,535,230)withtheinsurersforloss

arisingfromcanefiresintheNucleusestates,thesettlementofwhichremainedcontingentatyearend.





2013 2012 Shs’000 Shs’00017 TRADE AND OTHER RECEIVABLES

Receivablesfromfarmers* 2,608,274 2,467,824 Tradereceivables 351,477 848,896 Otherreceivablesandprepayments 545,712 907,078 Advancepaymentstosuppliers 176,711 225,396 Staffreceivables(note14) 83,692 77,066 KenyaPower&LightingCompanyLimited(KPLC)receivables - 57,788 3,765,866 4,584,048

TheKPLCreceivablesrepresentedcostsincurredbythecompanyonbehalfofKPLCfortheconstructionofatransmissionlinebetweenMumiasandMusagasubstationinordertoexportpowertothenationalgrid.Thecosts(inclusiveoftaxes)ofundertakingthedesign,construction,installation,testingandcommissioningoftheKPLCinterconnectionfacilitiesweretobebornebyKPLCandwererecoveredfromKPLCinaccordancewiththeKPLCInterconnectionFacilitiesProjectImplementationagreement.

TheconstructionofcogenerationplantwasfinancedpartlythroughtheSocietedePromotionetdeParticipationpourlaCooperationEconomiqueS.A.(PROPARCO)loan.UnderthedirectPowerPurchaseAgreement(PPA),betweenKPLC,PROPARCOandthecompany,KPLChasassignedtherightsoftheborrowertothelender.TherightsareinclusiveofthelendersabilitytoinstructKPLConwheretomakepaymentsrelatingtothePPA.TheamountreceivablefromKPLCofShs50.3millionformspartofthecollateralforthePROPARCOloan.

IncludedintradereceivablesisSh50,403,816(2012–Sh153,734,451)thatrelatestothesaleofelectricitytoKPLCinthenormalcourseoftrade.

*Receivablesfromfarmers 2013 2012 Shs’000 Shs’000

Gross amount 3,079,443 2,885,146 Provisionfordoubtfuldebts (471,169) (417,322)

Netamount(note17) 2,608,274 2,467,824

Receivablesfromfarmersrelatestocostoffarminputssuppliedtofarmersoncredit.Thecaneplantedactsascollateralandamountsarerecoveredonpurchaseofcanefromthefarmers.

Mumias Outgrowers Company Organisation Receivables

Gross Provisionfor Net Net amount doubtfuldebts 2013 2012 Shs’000 Shs’000 Shs’000 Shs’000

Accountancyfeesandagricultural extensionservices 251,453 (251,453) - - InterestreceivablefromMOCO 426,717 (426,717) - - AdvancetoMOCO 56,813 (56,813) - - Legalfeesrecoverable 64,064 (64,064) - -

799,047 (799,047) - -

ThedirectorshavemadeprovisionsfortheamountsdeemednotrecoverablefromMumiasOutgrowersCompanyOrganisation(MOCO)duetoitsinabilitytomeetitsobligationsastheyfalldue.

TheinterestreceivablefromMOCOhasbeendisputedbyMOCO(note32).

18 COLLATERAL DEPOSIT 2013 2012 Shs’000 Shs’000

Atbeginningoftheyear 294,817 314,524 Interest earned 899 1,182 Interestreceived (899) (1,182) Currencytranslationgain(loss) 7,108 (19,707) Attheendoftheyear 301,925 294,817

Thisisatermdepositwhichrepresentsa10%advancecollateraldepositonthePROPARCOLoanFacility(note26)thatthecompanywasrequiredtoplaceinaDebtReserveBankAccountwithareceivingbank(BarclaysBankofKenyaLimited).ThedepositamountedtoUSDollars3.5million.ThedepositearnsinterestatarateofLIBORminus0.25%.TheamountisexpectedtobedischargedbyDecember2017whentheloanisfullyrepaid.

19 SHORT TERM DEPOSITS – Held to maturity 2013 2012 Shs’000 Shs’000 Atamortisedcost

Maturing within 90 days

BarclaysBankofKenyaLimited - 51,797

Theeffectiveinterestrateswasasfollows:

2013 2012 % % BarclaysBankofKenyaLimited - 0.1

20 QUOTED INVESTMENTS –Atfairvaluethroughprofitorloss

2013 2012 Shs’000 Shs’000 Atbeginningoftheyear 35,240 25,267 Fairvaluegain 8,866 9,973


ThecompanywasallottedtheUchumiSupermarketsLimitedordinarysharesafterthesupermarketchainwasrelistedattheNairobiSecuritiesExchange.ThiswasinexchangeforanoutstandingdebtofShs14,937,205owedtothecompanybyUchumiSupermarketsLimitedandadebentureofShs7,226,625.ThetotalamountofShs22,163,830wasexchangedfor2,216,383ordinarysharesataparvalueofShs10pershare.Asattheendoftheyear,themarketpricepersharewasShs19.90(2012-Shs15.90)





21 NON CURRENT ASSETS HELD FOR SALE Factory Heavy Other plantand mobile Motor equipment Building equipment machinery vehicles andfixtures Total Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000

COST

At1July2011 - - - - - -Transferredfromproperty,plantandequipment(note10) - 257,280 20,682 - 704 278,666Disposals - (212,677) (3,785) - (704) (217,166)

At30June2012 - 44,603 16,897 - - 61,500

At1July2012 - 44,603 16,897 - - 61,500Transferredfromproperty,plantandequipment(note11) 2,298 62,872 6,317 1,396 1,354 74,237Disposals (2,298) (102,768) (16,898) (1,396) (801) (124,161)

At30June2013 - 4,707 6,316 - 553 11,576

NET BOOK VALUE

At 30 June 2013 - 4,707 6,316 - 553 11,576

At 30 June 2012 - 44,603 16,897 - - 61,500

Assetsheldforsalerepresentassetsthatthecompanyintendstodisposeofwithinthenextyearintheirpresentcondition.





2013 2012 Shs’000 Shs’000

22 SHARE CAPITAL

Authorised: 2,500,000,000ordinarysharesofShs2each 5,000,000 5,000,000

Issuedandfullypaid: 1,530,000,000ordinarysharesofShs2each 3,060,000 3,060,000

Issuedandfullypaidordinaryshares,whichhaveaparvalueofShs2,carryonevotepershareandcarryarighttodividend.

23 DEFERRED INCOME TAXATION LIABILITY

Deferredincometaxesarecalculatedonalltemporarydifferencesundertheliabilitymethodusingtheenactedtaxrateof30%.

Thenetdeferredtaxationliabilityisattributabletothefollowingitems: 2013 2012 Shs’000 Shs’000 Thenetdeferredtaxationliabilityis attributabletothefollowingitems:

Deferred taxation liabilities:

Acceleratedcapitalallowances 3,625,810 3,870,985 Revaluationsurpluses 1,360,042 1,436,090 Unrealisedexchangegains 260,369 60,981

5,246,221 5,368,056

Deferred taxation assets:

Provisionforservicegratuity (4,835) (1,184) Provisionforstaffleavepay (13,088) (8,566) Fairvalueadjustment-biologicalassets (92,081) (52,970) Unrealisedexchangelosses (204,906) (212,605) Generaldoubtfuldebtsprovision (86,196) (25,200) Otherprovisions (4,500) (4,500) Taxlossesavailableforoffsetagainstfutureprofits (2,397,143) (2,035,537)

(2,802,749) (2,340,562)

2,443,472 3,027,494

Themovementonthedeferredtaxationaccount duringtheyearwasasfollows:

At1July 3,027,494 3,327,449 Charge/(credit)-note8(a) –Currentyear (584,022) (319,330) –Prioryear - 19,375 At30June 2,443,472 3,027,494





2013 2012 Shs’000 Shs’000

24 RETIREMENT BENEFITS OBLIgATIONS

(a) Provision for service gratuity Balanceatthebeginningoftheyear 3,948 14,217 Provisionfortheyear 14,361 10,422 Paidduringtheyear (2,193) (20,691)

Balanceattheendoftheyear 16,116 3,948

Maturity analysis Withinoneyear 5,652 1,201 Afteroneyear 10,464 2,747

16,116 3,948

(b) Staff retirement defined benefit scheme

Afullactuarialvaluationwaslastcarriedoutasat30June2012byAlexanderForbesFinancialServices(E.A.)Limited.Anupdatedvaluationwascarriedoutasat30June2013forthepurposesofidentifyingmaterialmovementsasattheendofthereportingperiod.Thepresentvalueofthedefinedbenefitobligation,andtherelatedcurrentservicecostandpastservicecost,weremeasuredusingtheProjectedUnitCreditMethod.

Theprincipalassumptionsusedforthepurposesoftheactuarialvaluationswereasfollows:

2013 2012 Discountrate(%p.a) 12.5 12.5 Expectedreturnonschemeassets(%p.a) 10 10 Futuresalaryincreases(%p.a) 5%p.afor2yearsand8%thereafter 10

Theexpenseincurredintheyearinrespectofthesedefinedbenefitplansisasfollows.

2013 2012 Shs’000 Shs’000

Currentservicecostnetofemployeescontributions 18,321 24,618 Interestonobligation 179,900 171,100 Expectedreturnonplanassets (128,300) (134,800)

Totalexpense 69,921 60,918

Thecompany’sobligationsinrespectofitsdefinedbenefitplansareasfollows.

2013 2012 Shs’000 Shs’000

Presentvalueoffundedobligations 1,487,900 1,474,800 Fairvalueofschemeassets (1,621,500) (1,301,800)

Netover/(under)fundinginfundedplan (133,600) 173,000 Accumulatedunrecognizedactuarialgains/(losses) 133,600 (173,000)

Net asset ‑ ‑



24 RETIREMENT BENEFITS OBLIgATIONS (cont’d)

(b) Staff retirement defined benefit scheme (cont’d)

Movementsinthepresentvalueofthedefinedbenefitobligationinthecurrentandpreviousperiodwereasfollows:

2013 2012 Shs’000 Shs’000

Openingdefinedbenefitobligation 1,474,800 1,358,600Currentservicecost(netofemployeecontributions) 37,700 30,100Employeecontributions 34,900 30,000Interest costs 179,900 171,100 Actuarial(gains)/losses (95,800) 29,400Benefitspaid (143,600) (144,400)

Closingdefinedbenefitobligation 1,487,900 1,474,800

Movementsinthepresentvalueoftheplanassetsinthecurrentarepreviousperiodwereasfollows:

2013 2012 Shs’000 Shs’000

Openingfairvalueofplanassets 1,301,800 1,373,000Expectedreturnonplanassets 128,300 134,800Employeecontributions 34,900 30,000Employercontributions 70,600 63,500Actuariallosses 229,500 (155,100)Benefitspaid (143,600) (144,400)

Closingfairvalueofplanassets 1,621,500 1,301,800

Themajorcategoriesofplanassetsattheendofthereportingperiodareshownbelow;

Themajorcategoriesofplanassets,andtheexpectedrateofreturnattheendofthereportingperiodforeachcategory,areasfollows.

Fair value of plan assets Proportion 2013 2012 2013 2012 Sh ‘000 Sh ‘000 % %

Equities 544,049 381,494 34 29 Debtinstruments 889,700 715,851 55 47 Othersinvestments 187,751 204,455 12 12 1,621,500 1,301,800 100 100 Weightedaverageexpectedreturn 162,150 130,179 10 10

Theweightedexpectedreturnonschemeassetsis10%(2012:10%)perannum.



Theoverallexpectedrateofreturnisaweightedaverageoftheexpectedreturnsofthevariouscategoriesofplanassetsheld.Thedirector’sassessmentoftheexpectedreturnsisbasedonhistoricalreturntrendsandanalysts’predictionsofthemarketfortheassetinthenexttwelvemonths.

TheactualreturnonplanassetswasadeficitofShs357,000,000(2012:SurplusofShs20,300,000).

ContributionstothecompanystaffretirementdefinedbenefitschemearedeterminedbytherulesoftheschemeandtotalledShs69,920,509(2012–Shs60,917,699)intheyear.

Thehistoryofexperienceadjustmentsisasfollows; 30June2013 30June2012 Shs’000 Shs’000

Presentvalueofdefinedbenefitobligation 1,487,900 1,474,800 Fairvalueofplanassets (1,621,500) (1,301,800)

Netunder/(over)fundinginfundedplan (133,600) 173,000

Experienceadjustmentsonplanliabilities (95,800) 29,400

Experienceadjustmentsonplanassets 229,400 (155,100)

ThecompanyexpectstomakeacontributionofShs73,416,534(2012-Shs67,009,468)tothedefinedbenefitplansduringthenextfinancialyear.

2013 2012 Shs’000 Shs’000

25 DEFERRED gRANT INCOME

Atthebeginningoftheyear - 11,800 Receivedduringtheyear 15,379 Amortisationfortheyear - (11,800)

Attheendoftheyear 15,379 -

ThedeferredgrantincomerepresentstheunamortisedportionoffundsreceivedtowardsthepurchaseofequipmentunderaRoadsMaintenanceUnitpackagefinancedbytheKenyaSugarBoard.Theamortisationintheprioryearisequivalenttothedepreciationchargefortheequipmentpurchasedunderthegrant.Therewasnoequipmentpurchasedusingthegrantintheyearandthusnoamortisationwasrecognised.

24 RETIREMENT BENEFITS OBLIgATIONS (cont’d)

(b) Staff retirement defined benefit scheme (cont’d)





2013 2012 Shs’000 Shs’000

26 BORROWINgS

(a) Summary of borrowing arrangements

PROPARCO 1,458,631 1,907,635 CommercialBankofAfricaLimited 364,066 312,080 BarclaysBankofKenyaLimited 240,000 200,000 EcobankKenyaLimited 1,219,486 1,247,622 CFCStanbicBankLimited 519,705 251,593 KenyaCommercialBank 1,150,996 - KenyaSugarBoard 75,695 -

Totalloans(note29(b)) 5,028,579 3,918,930 Bankoverdrafts 1,011,204 1,470,049

Theborrowingscomprise(note29(b)) 6,039,783 5,388,979

Themovementinborrowingsispresentedonnote29(b)

Theborrowingsarerepayableasfollows:

Ondemandorwithin1year 3,058,448 2,463,448

Within2and5years 2,981,335 2,925,531 Within5and10years - -

Longtermborrowings 2,981,335 2,925,531

Totalborrowings 6,039,783 5,388,979

Analysis of borrowings by currency Borrowings Kshs Borrowingsin Total in equivalent localcurrency borrowings US$ Shs’000 Shs’000 Shs’000

30 June 2013 PROPARCOloan 18,529,411 1,458,631 - 1,458,631 CommercialBankofAfrica - - 364,066 364,066 BarclaysBankofKenya - - 240,000 240,000 EcobankKenyaLimited 10,017,263 819,486 400,000 1,219,486 CFCStanbicBankLimited 2,986,858 519,705 - 519,705 KenyaCommercialBankLimited - - 1,150,996 1,150,996 KenyaSugarBoard - - 75,695 75,695 31,533,532 2,797,822 2,230,757 5,028,579

Bankoverdraft 3,012,461 259,094 752,110 1,011,204 34,545,993 3,056,916 2,982,867 6,039,783



Analysis of borrowings by currency (cont’d)

Borrowings Kshs Borrowingsin Total in equivalent localcurrency borrowings US$ Shs’000 Shs’000 Shs’000 30 June 2012

PROPARCOloan 22,647,058 1,907,635 - 1,907,635

CommercialBankofAfrica - - 312,080 312,080

BarclaysBankofKenya - - 200,000 200,000

EcobankKenyaLimited 9,300,753 783,433 464,189 1,247,622

CFCStanbicBankLimited 2,986,858 251,593 - 251,593

34,934,669 2,942,661 976,269 3,918,930

Bankoverdraft 433,198 36,490 1,433,559 1,470,049

35,367,867 2,979,151 2,409,828 5,388,979

26 BORROWINgS (cont’d)

Movement in borrowings (excluding bank overdrafts) analysed by currency

Borrowings Borrowingsin Total inUS$ localcurrency borrowings Shs’000 Shs’000 Shs’000 2013 At1July2012 2,958,517 960,413 3,918,930 Additionalloans 52,918 2,673,428 2,726,346 Repaymentofprincipal (352,962) (1,139,183) (1,492,145) Accruedinterest 262,301 214,781 477,082 Repaymentofinterest (220,254) (256,828) (477,082) Currencytranslationgain (124,552) - (124,552)

At30June2013 2,575,968 2,452,611 5,028,579 2012 At1July2011 2,610,318 395,544 3,005,862 Additionalloans 873,050 1,100,723 1,973,773 Repaymentofprincipal (362,507) (520,000) (882,507) Accruedinterest 225,727 63,470 289,197 Repaymentofinterest (225,727) (63,470) (289,197) Currencytranslationgain (178,198) - (178,198)

At30June2012 2,942,663 976,267 3,918,930

ThecompanyobtainedaUSdollar10millionandKenyaShillings800millionsyndicateloanfacilityfromaconsortiumofEcobank

Limited,CommercialBankofAfrica LimitedandBankofAfrica Limited forpart financingof theEthanoldistilleryproject. Of thisfacility,USdollars9.3millionandKshs776millionwasdrawnduringthefinancialyearandcontinuestoaccrueinterestatanaveragerateof5.55%and13.36%respectively.Theloanisrepayablebyquarterlyinstalmentsoveraperiodof6yearsandissecuredbyafixedchargeovertheEthanolplant.RepaymentoftheprincipalwillbeginattheendofthemoratoriumexpiringinFebruary2013.Meanwhilethecompanycontinuestosettleaccruedinterestonamountdrawnasitfallsdue.





Duringthefinancialyear,thecompanycontinuedtomakequarterlyrepaymentoftheprincipalandinterestontheUSDollars35millionPROPARCOloanwhilealsomaintainingthecollateraldeposit(note18)at10%oftheloandisbursedassecurity.Inadditiontothiscollateral,theloanissecuredbyafixedchargeovertheCogenerationplant.

Atthecloseofthefinancialyear,thecompanyhadundrawncommittedbankingfacilitiesamountingtoShsNil(2012–Shs758,888,388).Thebankingfacilitiesconsistofbankoverdrafts,guaranteesandlettersofcredit.ThebankingfacilitiesaresecuredbylegalchargesoverLRMumiasSugarScheme/2andfixedandfloatingdebenturesoverallofthecompany’sassetsforShs1,380,318,000sharedoutonaparripassubasisbyKenyaCommercialBankLimited,KenyaCommercialFinanceCompanyLimitedandCfCStanbicBankLimited,withBarclaysBankofKenyaLimitedsharebeingShs630,815,000.

Theeffectiveinterestratesontheborrowingsduringtheyearwere: 2013 2012

PROPARCO 6.53% 6.53% BarclaysBankofKenyaLimited 19.96% 6.27% CommercialBankofAfricaLimited 13.36% 13.36% ECOBANKLimited 5.55% 5.55% CfCStanbicBankLimited 6.04% 3.31% KenyaCommercialBankLimited 13.96% - Bankoverdrafts 21.00% 21.30%

(b) Compliance with covenants in the PROPARCO loan agreement

Theamountsduetogetherwiththepenaltieshavesincebeensettledbythecompany. Thenoncompliancewiththecovenantsanddefaultshavemainlybeenoccasionedbyinadequatecashflowsfromoperatingactivities

arisingmainlyduetotheinsufficientcanesupplytothefactory.Asat30June2013,thecurrentliabilitiesexceededthecurrentassetsbyShs1,360,409,000.

Thecompanyhasputinplacevariousmarketingandpublicrelationstrategiestohelpimproveitsrelationswiththecanefarmers.Thesemeasuresareexpectedtoreversetheexistingconditionsandthecompanywillreturntonormalprofitability.

PROPARCOhasnotrequestedforacceleratedrepaymentoftheloanandthetermsoftheloanhavenotchanged.

27 TRADE AND OTHER PAYABLES 2013 2012 Shs’000 Shs’000

Tradepayables 3,152,466 1,525,534 Outgrowers 711,432 463,067 Prepaidsales 271,072 326,662 Accruals 405,741 202,840 Otherpayables 303,961 410,274

4,844,672 2,928,377

28 PROVISION FOR STAFF LEAVE PAY Atthebeginningoftheyear 28,552 33,822 Provisionfortheyear 18,760 724 Paidintheyear (3,686) (5,994)


26 BORROWINgS (cont’d)

Movement in borrowings (excluding bank overdrafts) analysed by currency (cont’d)



29 NOTES TO THE STATEMENT OF CASH FLOWS

(a) Reconciliation of profit before taxation to cash generated from operations

2013 2012 Shs’000 Shs’000

Profitbeforetaxation (2,235,999) 1,764,029

Adjustments: Financeincome (394,336) (411,023) Financecosts 793,571 208,352 Depreciation(note11) 1,167,310 912,108 Amortisation(note12) 22,067 11,678 Lossondisposalofnoncurrentassetsheldforsale 122,296 175,008 Exchangedifferenceoncollateraldeposit (7,108) 19,707 Gainondisposalofmotorvehicle - (517) Amortisationofdeferredgrantincome(note25) - (11,800) Foreignexchangelosses/(gains)onborrowings (124,552) (178,198) Gainonrevaluationofquotedinvestments (8,866) (9,973) Lossonassetwrittenoff 58,710 80,509

Netcash(usedin)/generatedfromoperationsbeforeworking capitalchanges (606,907) 2,559,880

Movements in: Non-currentreceivables (7,605) (57,705) Inventories(note29(d)) (786,976) (776,032) Biologicalassets (28,285) 19,522 Tradeandotherreceivables 818,182 (720,453) Provisionforservicegratuity 12,168 (10,269) Tradeandotherpayables 1,916,655 903,618 Provisionforstaffleavepay 15,074 (5,270)

Netcashgeneratedfromoperations 1,332,306 1,913,291

(b) Loans movement

Atbeginningofyear 3,918,930 3,005,862 Received 2,726,346 1,973,773 Repaymentofprincipal (1,492,145) (882,507) Accruedinterest 477,082 289,197 Repaymentofinterest (477,082) (289,197) Currencytranslation(gain)/loss (124,552) (178,198) Atendoftheyear(note26) 5,028,579 3,918,930

(c) Analysis of the balances of cash and cash equivalents

Cashandbankbalances 70,923 138,063 Depositswithfinancialinstitutions(note19) - 51,797 Bankoverdrafts(note26) (1,011,204) (1,470,049)

(940,281) (1,280,189)





2013 2012 Shs’000 Shs’000

(d) Movement in inventory

Increaseininventory (786,976) (484,974) Criticalsparestransferredfrominventory(note11) - (291,058) (786,976) (776,032)

30 OPERATINg LEASE ARRANgEMENTS

The company as lessee:

Minimumleasepaymentsunderoperatingleasesrecognisedthroughprofitorloss 17,011 19,899

Attheendofthereportingperiod,thecompanyhadoutstandingcommitmentsunderoperatingleases,payableasfollows:

Withinoneyear 12,054 14,044Inthesecondtofifthyearsinclusive 10,545 56,176Afterfiveyears - -

22,599 70,220

Operatingleasepaymentsrepresentrentalspayablebythecompanyforcertainofitsofficepremises,storagefacilitiesandcanefarming.Theleasesarecancellablewithnopenaltywhenthecompanygivesthreemonthsnoticetovacatethepremises.

The company as a lessor:

PropertyrentalincomeearnedduringtheyearamountedtoShs11,175,000(2012–Shs9,902,000).Attheendofthereportingperiod,thecompanyhadcontractedwithtenantsforthefollowingfutureleasereceivables.

2013 2012 Shs’000 Shs’000

Withinoneyear 11,175 9,902Inthesecondtofifthyearsinclusive - 39,608Afterfiveyears - -

11,175 49,510

31 CAPITAL COMMITMENTS

Commitmentsattheyear-endforwhichnoprovisionhasbeenmadeinthesefinancialstatements:

Authorisedandcontractedfor 139,484 337,434Authorisedbutnotcontractedfor 1,012,646 2,422,429

1,152,130 2,759,863

Thecapitalcommitmentsrelateprimarilytosoftwarepurchaseandupgrading(Shs65million)andimprovementoffacilitiesatthefactory(Shs32million)

29 NOTES TO THE STATEMENT OF CASH FLOWS (cont’d)



2013 2012 Shs’000 Shs’00032 CONTINgENT LIABILITIES

Pendingclaims 144,250 107,176Guarantees 214,616 138,600

MumiasSugarCompanyLimited(MSC)andMOCOhaveadisputewhereMOCOhasmadeaclaimofShs3,531,008,011inrespectofcanedevelopmentfundsandinterestovercharge.Thedisputewastakentoarbitrationbutthearbitrationprocesswassuspendedafterajudicialreview.Thedirectorsareoftheopinionthattheclaimisunlikelytosucceedandhasthereforenotbeenprovidedforinthesefinancialstatements.

AllamountsduefromMOCOinrespectofaccountancyfees,outstandingloansandadvances,subsidiestofarmersandaccruedinterest

havebeenfullyprovidedforasindicatedinNote17

33 RELATED PARTY BALANCES AND TRANSACTIONS

a) Staff loans

Thecompanyoperatesacompanycar loanschemeformanagerialandsupervisoryemployees. ThebalancesoutstandingonthatschemeatyearendwasShs241,390,000(2012–Shs214,421,820).Thecarsareregisteredinjointnamesofthecompanyandtheemployeesassecurityforthecarloans.TheinterestincomeearnedonstaffloansintheyearamountedtoShs12,025,000(2012–Shs9,157,000).

b) Key management compensation

Theremunerationforkeymanagementduringtheyearwasasfollows: 2013 2012 Shs’000 Shs’000

Salariesandotherbenefits 73,679 70,503

c) Directors’ remuneration

Feesforservicesasdirectors 4,500 5,500 Other emoluments 49,346 78,525

53,846 84,025 34 RISK MANAgEMENT POLICIES

Overview

Thecompany’sactivitiesexposeittoavarietyofoperationalandfinancialrisks.Theseactivitiesinvolvetheanalysis,evaluation,acceptanceandmanagementofsomedegreeofriskorcombinationofrisks.Takingriskiscoretothecompany’sbusinessandtheoperationalrisksareaninevitableconsequenceofbeinginbusiness.

Thecompany’saimisthereforetoachieveanappropriatebalancebetweenriskandreturnandminimizepotentialadverseeffectsonitsfinancialperformance.Thekeytypesoffinancialrisksinclude:

• Creditrisk• Marketrisk• Liquidityrisk



Thekeyoperationalrisksincludepoliticalandenvironmentalrisks.

Thecompany’sfinancialriskmanagementpoliciesaredesignedtoidentifyandanalyzetheserisks,tosetappropriaterisklimitsandcontrols,andtomonitortherisksandatthesametimeensuringadherencetolaiddownlimits.Thisisachievedbymeansofreliableandup-to-dateinformationsystems.Thecompanyregularlyreviewsitsfinancialriskmanagementpoliciesandsystemstoreflectchangesinmarketsandemergingbestpractices.Thecompany’soverallriskmanagementprogrammefocusesontheunpredictabilityofchangesinthebusinessenvironmentandseekstominimizepotentialadverseeffectsofsuchrisksonitsfinancialperformancewithintheoptionsavailableintheKenyanmarketbysettingacceptablelevelsofrisks.FinancialriskmanagementiscarriedoutbyseniormanagementunderthesupervisionoftheBoardofDirectors.Managementinconjunctionwithvariouscommitteesthenidentifies,evaluatesandaddressesrisksaccordingly.

Inaddition,thecompanyhasanindependentinternalauditdepartmentwhichreportsdirectlytotheBoardAuditCommittee.Thisdepartmentisresponsibleforassessingtheriskfacedbythecompanyonanongoingbasis,evaluateandtestthedesignandeffectivenessofitsinternalaccountingandoperationalcontrolsthataddresstheserisks.Thecompanydoesnotenterintoortradeinfinancialinstruments,includingderivativefinancialinstruments,foreitherhedgingorspeculativepurposes.

Credit risk management

Creditriskreferstotheriskthatacounterpartywilldefaultonitscontractualobligationsresultinginfinanciallosstothecompany.Thecompanyhasadoptedapolicyofonlydealingwithcreditworthycounterpartiesandobtainingsufficientcollateral,whereappropriate,asameansofmitigatingtheriskoffinanciallossfromdefaults.Thecompanyisexposedtothisriskinseveralareasincludingtradeandotherreceivablesandcashandcashequivalents.However,thecompany’screditriskisconcentratedmainlyinadvancesissuedtofarmersintheformoffarminginputsandintradereceivablesintheformofsugardebtors.

Thecompanygivesadvancestofarmersintheformoffarminginputstofacilitatesugarcanecropestablishmentandtoimprovetheproductivityofthegrowingcrop.Advancestofarmersareeventuallydeductedfromthevalueofthecanedelivereduponharvesting.Thekeyriskisthereforethattheyieldfromthecropwillnotbesufficienttocovertheadvancedcredit.

Thecompanycountersthisriskbyplacingsignificantemphasisonthevettingandselectionoffarmers.Thisisdonewiththeaidof

comprehensiveanddocumentedcriteriawhichincludesareviewoffarmers’paymenthistories.Thecompanyalsomonitorsbudgetedsalesoutputsandexpectedfactorycrushingcapacityandalsoforecastsofexpectedenvironmentalconditionstoaiditinbudgetingfortheseadvances.Howevertheexistenceoffavourableweatherconditionswillalwaysremainoutsidethecontrolofthecompany.Politicalupheavalsandgeneralunrestalsoposearisktothecompanyusuallyresultingintheburningofimmaturecane.Burningofimmaturecanereducesthequalityandthequantityoftheyieldfromsuchcaneinadditiontoraisingproductioncostsandwaste.Whileanelementofthisriskisoutsidethecompany’scontrol,ithashoweversoughttomitigatethisriskbyenhancingsecurityinitsnucleusestates.Thecompanydoesnotpurchaseburntcanefromfarmersinordertodiscourageirresponsibleburningofimmaturecanebyfarmersinordertoreadilyobtainquickcash.

Thecompanyisintheprocessofexpandingitsoperationstoavoidover-relianceonthesmallholderoutgrowersystemswithitssignificantoperationalchallenges.Thisismainlythroughexpandingtootherfarmingareaswhereitcanemploythemechanizedplantationfarmingwhichisexpectedtobeeasierandlesscostlytomanage,resultinhigherperhectareproductivityandreducedoperationalcostshencemakingthebusinessmorecompetitiveandasaresultyieldhigherreturnsfortheshareholders.Thecompanyhasalsodiversifiedintoenergyproduction,ethanolandwatertoreduceoverrelianceonsugarsales.

Thebulkofthecompany’srevenuerelatestosugarsales.ThecompanyhasadocumentedcreditpolicywhosemanagementandimplementationisoverseenbyaCreditCommittee.TheCommitteemanageslimitsandcontrolsconcentrationsofcreditriskwherevertheyareidentified.Itstructuresthelevelsofcreditriskitundertakesbyplacinglimitsontheamountofriskacceptableinrelationtoadebtororcategoriesofdebtors.Suchrisksaremonitoredonaregularbasisandaresubjecttoregularreviews.Exposuretocreditriskismanagedthroughregularanalysisoftheabilityofcreditcustomerstomeettheirobligationsandbyadjustingthelimitsappropriately.Thecreditriskontradereceivablesisfurthermitigatedbyrequiringmostcreditcustomerstoprovideguaranteesissuedbyreputablebanksrecommendedbythecompany.

34 RISK MANAgEMENT POLICIES (cont’d)





Inmeasuringcreditriskrelatingtotradereceivables,thecompanythereforereflectsthreecomponents: The‘probabilityofdefault’bythecustomerorcounterpartyonitscontractualobligations;currentexposurestothecounterpartyand

itslikelyfuturedevelopment,fromwhichthecompanyderivethe‘exposureatdefault’;andthelikelyrecoveryratioonthedefaultedobligations

Withregardtoimpairmentofoutstandingreceivables,itisthecompany’spolicytoassess/reviewalldebtsover90daysforimpairmentandtoprovideforalldebtswhereadebtorisdeclaredbankruptorfacingfinancialdifficulties.Insomecaseswhereanunsecuredcustomerisinarrearsthewholeamountisprovidedfor.

Maximumexposuretocreditriskbeforecollateralheldorothercreditenhancements

Themaximumexposuretocreditriskrepresentsaworstcasescenarioofcreditriskexposuretothecompanyattheendofthereportingperiod,withouttakingaccountofanycollateralheldorothercreditenhancementsattached.Forreportedfinancialassets,thisexposureisbasedonnetcarryingamountsasreportedinthestatementoffinancialposition.

Collateral

Thecollateralheldforsugardebtors includeguaranteesfromreputablebanksrecommendedbythecompany.Staffdebtorsmainlycomprisecarloansadvancedtomembersofstaff.Thevehiclesarejointlyregisteredintheemployeeandcompany’snameandhencethereisnosignificantexposurearisingfromstaffreceivables.Thecreditriskonliquidfundsislimitedbecausethecounterpartiesarecommercialbankswithhighcredit-ratingsassignedbyinternationalcredit-ratingagencies.Nocollateralisheldforadvancestofarmers.

Thecreditriskexposuresareclassifiedinthreecategories:

Neither past due nor impaired

Thecompanyclassifiesfinancialassetsunderthiscategoryforthoseexposuresthatareuptodateandinlinewithcontractualagreements. Past due but not impaired

Theserelatetofinancialassetsthathavepassedthecontractualpaymentperiodbutareexpectedtoberecoveredwithinreasonabletimelines.Theseassetsarenotimpairedandcontinuetoberecoveredwiththeactiveinvolvementofmanagement.Thecollateralheldforsugardebtorsinthiscategoryincludesguaranteesfromreputablebanksrecommendedbythecompany.

Impaired

Impairedfinancialassetsarethoseforwhichthecompanydeterminesthatitisprobablethatitwillbeunabletocollectallpaymentsdueaccordingtothecontractualtermsoftheagreement(s).Nocollateralisheldwithrespecttothedebt,orthecollateraldoesn’tsufficientlycovertheexposure.

Onanongoingbasis,acreditevaluationisperformedonthefinancialconditionofaccountsreceivable.

Analysis of credit risk exposure

Thecompany’slargestcustomeraccountedfor15.5%ofitscurrentyearsales(2012:21.1%):

Concentrationofcreditrisk to the largestcustomerdidnotexceed5%ofgrossmonetaryassetsat theendof thereportingperiod.Concentrationofcreditrisktoanyothercounterpartydidnotexceed5%ofgrossmonetaryassetsattheendofthereportingperiod.

34 RISK MANAgEMENT POLICIES (Cont’d)

Credit risk management (cont’d)



Theamountthatbestrepresentsthecompany’smaximumexposuretocreditriskasat30June2013ismadeupasfollows: Neitherpastdue Pastduebut norimpaired notimpaired Impaired Total Shs’000 Shs’000 Shs’000 Shs’000

Tradereceivables 253,712 97,765 122,949 474,426 Receivablesfromfarmers - 2,608,274 471,169 3,079,443 MOCOreceivables - - 799,047 799,047 KPLCreceivables - - - - Quotedinvestments–Uchumishares 44,106 - - 44,106 Collateraldeposit 301,925 - - 301,925 Shorttermdeposits - - - - Bankbalances 70,923 - - 70,923 670,666 2,706,039 1,393,165 4,769,870 Less:impairmentallowance - - (1,393,165) - 670,666 2,706,039 ‑ 4,769,870

Theamountthatbestrepresentsthecompany’smaximumexposuretocreditriskasat30June2012ismadeupasfollows: Neitherpastdue Pastduebut norimpaired notimpaired Impaired Total Shs’000 Shs’000 Shs’000 Shs’000

Tradereceivables 706,760 142,136 84,000 932,896 Receivablesfromfarmers - 2,467,824 417,322 2,885,146 MOCOreceivables - - 799,047 799,047 KPLCreceivables - 57,788 - 57,788 Quotedinvestments–Uchumishares 35,240 - - 35,240 Collateraldeposit 294,817 - - 294,817 Shorttermdeposits 51,797 - - 51,797 Bankbalances 138,063 - - 138,063 1,226,677 2,667,748 1,300,369 5,194,794 Less:impairmentallowance - - (1,300,369) (1,300,369) 1,226,677 2,667,748 ‑ 3,894,425

Ofthetotalgrossamountofimpairedreceivables,thefollowingamountshavebeenindividuallyassessedasimpaired:

2013 2012 Shs’000 Shs’000

Tradereceivables 122,949 84,000 Receivablesfromfarmers 471,169 417,322 MOCOreceivables 799,047 799,047

1,393,165 1,300,369



Analysis of credit risk exposure (cont’d)





Thetablebelowshowstheageingprofileofpastduebutnotimpairedreceivables: 2013 2012 Shs’000 Shs’000

31-60days 50,403 70,284 61-90days 47,362 145,734 Above90days 2,608,274 2,393,942 2,706,039 2,609,960

Market risk management

Market risk is the riskarising fromchanges inmarketprices, suchas interest rateand foreignexchange rateswhichwillaffect thecompany’sincomeorthevalueofitsholdingoffinancialinstruments.Theobjectiveofmarketriskmanagementistomanageandcontrolmarketriskexposureswithinacceptableparameters,whileoptimisingthereturn.Overallresponsibilityformanagingmarketriskrestswiththecompany’smanagementunderthesupervisionoftheBoardofDirectors.

(i) Interest rate risk Interest rate riskarisesprimarily fromborrowings,fixedandcollateraldeposits,cashandcashequivalents.Thecompany’s

managementmonitorsthesensitivityofreportedinterestratemovementsonamonthlybasisbyassessingtheexpectedchangesinthedifferentportfolios.

At30June2013,anincrease/decreaseof3percentagepointsoninterestrateswouldhaveresultedinadecrease/increaseinpre-taxprofitofShsNil(2012–Shsnil).TheinterestrateonthePROPARCOloanandBarclaysbankloansarefixedtherebyeliminatingtheinterestraterisk.Thishasnotbeenfactoredinthesensitivityanalysisabove.

(ii) Currency risk Thecompanyundertakescertaintransactionsdenominatedinforeigncurrencies,mainlytheUSdollar,theEuro,theSterling

Poundand theSouthAfricanRand.This results inexposures toexchange ratefluctuations. Thebalances impacted in thisregardarethebalancesduetoforeignsuppliers,balancesduefromforeigndebtorsordenominatedinforeigncurrency,bankbalancesandcollateralandtermdepositsdenominatedinforeigncurrency.

Asat30June2013,anincrease/decreaseof5percentagepointsonexchangerateswouldhaveresultedinandecrease/increaseinpre-taxprofitofShs14,510,180(2012–Shs95,381,821).ThisriskisprimarilyattributedtothePROPARCOloanafteradjusting for theeffectofUSdollardenominatedPROPARCO loancollateraldeposit, termdeposits, tradeandotherreceivablesandEurodenominatedtradeandotherreceivables.

Liquidity risk management

Thisistheriskthatthecompanywillencounterdifficultiesinmeetingitsfinancialcommitmentsfromitsfinancialliabilitiesthataresettledbydeliveringcashoranotherfinancialasset.Prudentliquidityriskmanagementincludesmaintainingsufficientcashtomeetcompanyobligationswhen they fall due, underbothnormaland stressed conditions,without incurringunacceptable lossesorat the riskofdamagingthecompany’sreputation.

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has developed and put in place anappropriate liquidityriskmanagement frameworkfor themanagementof thecompany’sshort,mediumandlong-termfundingandliquiditymanagementrequirements.

Thecompanymanagesliquidityriskbymaintainingadequatereserves,bankingfacilitiesandreserveborrowingfacilities,bycontinuouslymonitoringforecastandactualcashflowsandmatchingthematurityprofilesoffinancialassetsandliabilities.Inaddition,allmajorcapitalinvestmentsarefundedbyamixtureofequityandlongtermdebt.



Analysis of credit risk exposure (cont’d)



The following table analyses the company’s remaining contractual maturity for its non-derivative financial liabilities with agreedrepaymentperiods.Thetablehasbeendrawnupbasedontheundiscountedcashflowsoffinancialliabilitiesbasedontheearliestdateonwhichthecompanymayberequiredtopay.Thetablesincludebothinterestandprincipalcashflowsandexcludetheimpactofnettingagreements.

1-6 6–12 1–5 Above months months years 5years Total Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 At 30 June 2013 Borrowings 865,058 573,092 3,567,057 - 5,005,207 Tradepayables 3,152,466 - - - 3,152,466 Payablestooutgrowers 711,432 - - - 711,432 Bankoverdrafts 1,011,204 - - - 1,011,204

Totalfinancialliabilities (contractualmaturitydates) 5,740,160 573,092 3,567,057 - 9,880,309 At 30 June 2012 Borrowings 777,897 493,719 3,664,309 - 4,935,925 Tradepayables 1,525,534 - - - 1,525,534 Payablestooutgrowers 463,067 - - - 463,067 Bankoverdrafts 1,470,049 - - - 1,470,049 Totalfinancialliabilities (contractualmaturitydates) 4,236,547 493,719 3,664,309 - 8,394,575

Determination of fair value and fair values hierarchy IFRS7 specifies a hierarchy of valuation techniques basedonwhether the inputs to those valuation techniques are observable or

unobservable.Observableinputsreflectmarketdataobtainedfromindependentsources;unobservableinputsreflectthebank’smarketassumptions.Thesetwotypesofinputshavecreatedthefollowingfairvaluehierarchy:

• Level1–Quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities.Thislevelincludeslistedequitysecuritiesanddebtinstrumentsonexchanges.

• Level2–InputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheassetorliability,eitherdirectly(thatis,asprices)orindirectly(thatis,derivedfromprices).

• Level3–inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(unobservableinputs).Thislevelincludesequityinvestmentsanddebtinstrumentswithsignificantunobservablecomponents.Thishierarchyrequirestheuseofobservablemarketdatawhenavailable.Thecompanyconsidersrelevantandobservablemarketpricesinitsvaluationswherepossible.

The company has investment in quoted Uchumi shares which are carried at fair value through profit or loss amounting to Shs44,106,000(2012–Shs35,240,000).Thisinvestmentiscategorisedunderlevel1.Therewerenofinancialassetscategorisedundertheotherlevelsattheendofthereportingperiod(2012–nil).

35 CAPITAL MANAgEMENT

Thecompany’sobjectiveswhenmanagingcapitalare:

• Tomatchtheprofileofitsassetsandliabilities,takingaccountoftherisksinherentinthebusiness;• Tomaintainfinancialstrengthtosupportbusinessgrowth;and• Tosafeguardthecompany’sabilitytocontinueasagoingconcernsothatitcancontinuetoprovideadequatereturnstoits

shareholdersandvaluetoallotherstakeholders.


Liquidity risk management (cont’d)





Thecapitalstructureofthecompanyconsistsofdebt,whichincludestheborrowingslesscashandcashequivalentsandequityattributabletoequityholders,comprisingissuedcapital,revaluationsurplusandretainedearnings.

TheBoardofDirectorsreviewsthecapitalstructureonaregularbasis.Aspartofthisreview,theboardconsidersthecostofcapitalandtherisksassociatedwitheachclassofcapital.Basedonthereview,thecompanyanalysesandassessesthegearingratiotodeterminetheappropriatelevels.Thisratioiscalculatedasnetdebtdividedbyequity.Netdebtiscalculatedastotalborrowingslesscashandcashequivalents.

Therehavebeennomaterialchangesinthecompany’smanagementofcapitalduringtheyear.

2013 2012 Shs’000 Shs’000 Thegearingratioattheyearendwasasfollows:

Shareholders’equity 13,288,970 15,723,686 Borrowings(note26) 5,028,579 3,918,930 Collateraldeposits(note18) (301,925) (294,817) Depositswithfinancialinstitutions(note19) - (51,797) Bankoverdraftlesscashandbankbalances 940,281 1,331,986

Netdebt 5,666,935 4,904,302

Gearingratio 42.64% 31.19%

36 INCORPORATION

ThecompanyisdomiciledandincorporatedinKenyaundertheCompaniesAct.

37 CURRENCY

ThefinancialstatementsarepresentedinKenyaShillingsroundedtothenearestthousand(Sh‘000)whichisalsothefunctionalcurrency

35 CAPITAL MANAgEMENT (Cont’d)



DETAILED STATEMENT OF COMPREHENSIVE INCOME


Appendix iaPPendix i

2013 2012 Appendix Shs’000 Shs’000

SALESGross sugar sales 13,458,729 17,877,928 Gross molasses sales 159,455 331,293 Grosselectricitysales 341,992 487,537Gross ethanol sales 939,721 5,916Gross water sales 36,203 ‑

Total gross sales 14,936,100 18,702,674

Valueaddedtax (2,049,620) (2,564,669)Sugardevelopmentlevy (446,245) (591,719)ExciseDuty (482,412) (3,600)

NETSALES 11,957,823 15,542,686

COSTOFSALES

Canepurchases II (6,472,874) (6,970,953)Factoryproduction-sugar II (1,009,703) (1,380,259)Factoryproduction-energy II (439,490) (302,084)Factoryproduction–ethanol II (309,789) (30,011)Factoryproduction–water II (130,740) (3,332)Factoryengineering II (1,240,041) (811,719)Productionoverheads III (1,060,107) (1,423,219)Sugarpackagingmaterials (290,281) (268,629)Decreaseinthevalueofsugarinventories 557,231 129,549

(10,395,794) (11,060,657)

GROSS PROFIT 1,562,029 4,482,029

OTHEROPERATINGINCOME III 237,286 133,031

MARKETINGANDDISTRIBUTIONCOSTS III (870,920) (733,345)

ADMINISTRATIVEEXPENSES IV (1,939,560) (1,567,202)

OTHEROPERATINGEXPENSES IV (880,401) (825,547)

FINANCEINCOME 394,336 411,023

FINANCECOSTS (724,988) (141,638)

(LOSS)/PROFITBEFORETAXATION (2,222,218) 1,758,351

Reconciliationofresultsatactualcostofbiologicalassetsandagriculturalproducetoresultsbasedonfairvaluationofbiologicalassetsandagriculturalproduce: (LOSS)/PROFITBEFORETAXATIONASABOVE (2,222,218) 1,758,351

Fairvalueadjustment (13,781) 5,678

(LOSS)/PROFITBEFORETAXATIONASPERSTATEMENTOFCOMPREHENSIVEINCOME (2,235,999) 1,764,029



DETAILED STATEMENT OF COMPREHENSIVE INCOME (Cont’d)


Appendix iiaPPendix ii

2013 2012 Shs’000 Shs’000 CANE PURCHASES

Registeredoutgrowerscane 6,070,735 6,588,976 Nucleus estate cane 402,139 381,977

6,472,874 6,970,953 FACTORY PRODUCTION- SUgAR

Depreciationoffactoryplantandbuildings 253,563 466,788 Staff costs 425,738 419,826 Other costs 108,607 252,303 Canehandling 48,138 91,701 Factorychemicals 67,724 68,613 Insuranceoffactoryplantandbuildings 71,876 62,659 Waterandeffluenttreatment 34,057 18,369

1,009,703 1,380,259 FACTORY PRODUCTION- ENERgY

Depreciationoffactoryplantandbuildings 264,864 262,055 Staff costs 10,004 ‑ Legalandprofessionalcosts - 8,630 Other costs 24,789 3,083 Factorychemicals 49,231 21,102 Plantandequipmentrepairs 27,824 12,679 Mechanical,electrical&instrumentspares 62,778 (5,465)

439,490 302,084

FACTORY PRODUCTION- ETHANOL

Depreciationoffactoryplantandbuildings 248,129 19,812 Staff costs 52,298 10,187 Other costs 9,362 12

309,789 30,011

FACTORY PRODUCTION- WATER

Depreciationoffactoryplantandbuildings 23,455 1,863 Packagingmaterials 21,345 1,060 Other costs 94,141 1,834 Increaseinvalueofwater (8,201) (1,425)

130,740 3,332

FACTORY ENgINEERINg

Mechanicalspares 418,963 231,359 Staff costs 353,482 266,243 Plantandequipmentrepairs 211,637 122,318 Electricalspares 102,809 81,260 Fuelsandlubricants 55,198 40,306 Factoryinstruments 58,679 45,444 Weldingmaterials 30,716 24,789 Other costs 8,557 ‑

1,240,041 811,719

2013 2012 Shs’000 Shs’000

PRODUCTION OVERHEADS

Caneestablishmentanddevelopmentothercosts 216,021 413,455 Caneestablishmentanddevelopmentstaffcosts 204,140 251,700 Factoryadministration–staffcosts 22,664 245,179 Harvestingandtransportstaffcosts 144,351 133,510 Harvestingandtransportothercosts 457,994 311,328 BiologicalAssetsImpairmentcosts 14,937 68,047

1,060,107 1,423,219

OTHER OPERATINg INCOME

Guest house 55,832 49,413 Sundryincome 115,853 22,809 Amortisationofgrantincome - 11,800 Rentreceivable 11,175 9,902 Seed cane sales 45,560 29,134 Gainonrevaluationofquotedequityinvestmentsatfair valuethroughprofitorloss 8,866 9,973

237,286 133,031

MARKETINg AND DISTRIBUTION COSTS

Road haulage 347,441 410,928 Staff costs 146,579 90,288 Advertisingandpromotion 159,590 131,100 Other costs 132,674 89,045 Storage costs 67,797 10,056 Depreciation 11,791 1,928 Railtransport 5,048 -

870,920 733,345


Appendix iiiaPPendix iii



2013 2012 Shs’000 Shs’000

ADMINISTRATIVE EXPENSES

Staff costs 586,173 441,332 Other costs 522,498 202,744 Legalandprofessionalfees 83,188 161,869Otherprovisions - 51,239Depreciation 82,668 80,699Medicalservices 71,808 59,546Travelling 60,508 62,188Security 89,497 59,857Publicationsandlisting 27,354 35,756Directors’emoluments 20,660 22,877Amortisationofintangibleassets 7,763 11,678Softwarelicensesandsupport 19,653 38,337Insurance 83,375 56,400 Grouplifeinsurance 20,990 20,353Bankcharges - 32,247Stafftrainingandrecruitmentcosts 26,774 46,828Telephonesandcommunications 17,498 15,324Auditfees 6,500 6,300Stationery 5,413 5,903Badanddoubtfuldebts 206,174 73,342Donations 1,066 1,872Assetwrittenoff - 80,509

1,939,560 1,567,202

OTHER OPERATINg EXPENSES

Staff costs 268,805 54,385 Depreciation 74,217 78,962Other costs 316,780 462,388 Sportsandcommunityservices 27,733 1,709Residentialestateservices 11,882 53,612Lossondisposalofproperty,plantandequipmentand Non‑current assets held for sale 180,984 174,491

880,401 825,547


Appendix iVaPPendix iV Notesnotes



Notesnotes

Share Member No........................................The Company Secretary,MumiasSugarCompanyLimited(MSC)PrivateBagMumias

PROXY

I/We____________________________________________________________________ of_____________________________________________ Beinga*Member/MembersofthenamedCompany,herebyappoint:

_____________________________________________________________________of________________________________________________

Orfailinghim___________________________________________________________of______________________________________________

As*my/ourproxytovotefor*me/uson*my/ourbehalfattheAnnualGeneralMeeting(AGM)oftheCompanytobeheldonFriday6thDecember

2013andatanyadjournmentthereof.

*Strikeoutasappropriate

Signature(s)

Signedthis__________________________________________________dayof__________________________________________2013

Notes:

1. Theaddressshouldbethatshownintheregisterofmembers.

2. Inthecaseofamemberbeingacorporation,thisformofproxymustbeexecutedeitherunderitscommonsealorsignedonitsbehalfbyan

attorneyorofficerofthecorporationdulyauthorized.

3. ApersonappointedtoactasaproxyneednotbeamemberoftheCompany.

4. Incaseofjointholders,thesignatureofanyoneholderwillbesufficientbutthenamesofalljointholdersshouldbestated.

Cuthere............................................................................................................................................................................................

Shareholders admission letter for MSC AgM on 6th December 2013

PleasecompletethisletterandnotethatthisadmissionlettermustbeproducedattheAnnualGeneralMeetingbyyouoryourproxyinorderto

recordattendance.KindlynotethatonlytheregisteredshareholderortheirproxynotifiedtotheCompanynotlaterthan48hoursbeforethemeet‑

ingwillbeadmittedtothemeeting.

NAME__________________________________________________________________________________

SIGNATURE_____________________________________________________________________________

SHAREACCOUNTNUMBER____________________________________________________________________

AnnualGeneralMeeting(AGM)ofMumiasSugarCompany(MSC)tobeheldatTomMboyaLabourCollege,RingRoadMilimani,Kisumuon

Friday6thDecember2013at10.00am.

Proxy FormProxY forM

AnnuAl report & finAnciAl stAtementstwenty tHirteen92

Nambari ya Mwanahisa.........................................Katibu Wa Kampuni,MumiasSugarCompanyLimited(MSC)PrivateBagMumias

WAKALA

Mimi/Sisi___________________________________________________________kutoka________________________________________________ Kama*mwanachama/WanachamawaKampuniiliyotajwanamteua/twamteua

_____________________________________________________________________kutoka______________________________________________

Auakikosa___________________________________________________________kutoka______________________________________________

Kamawakalawangu/wetukupigakurakwaniabayangu*/sisiwakatiwaMkutanowapamojawamwaka(AGM)utakaofanyikaIjumaa

Desemba6,2013aukuahirishwakwake.

*Jazapanapohitajika.

Imetiwasahihi__________________________________________________Tarehe__________________________________________Mwaka2013

Muhimu:

1) Anwaniiwekamailivyoonyeshwakatikarejistayawanachama

2) Endapomwanachamaatakuwashirika,nilazimafomuhiiyauwakilishiipigwemhuriaukutiwasahihikwaniabayakenawakiliauafisawa

shirikaaliyeidhinishwa.

3) Silazimakwamtualiyeteuliwakamawakalakuwamwanachamawakampuni

4) Endapommilikinizaidiyammoja,sahihiyammojawaoitakuwaimetoshalakinimajinayawamilikiwoteyaonyeshwe.

KataHapa............................................................................................................................................................................................

Barua ya kuwaruhusu wanahisa kuhudhuria mkutano wa pamoja wa mwaka wa MSC Ijumaa Desemba 6, 2013.

Tafadhalijazabaruahiinaufahamukwambanilazimaitolewenaweauwakalawakowakatiwamkutanowapamojawamwakailikurekodi

idadiyawaliohudhuria.

Tafadhalifahamukwambaniwanahisawaliosajiliwatuaumawakalawaoambaomajinayaoyatakuwayamewasilishwakwakampunisaa48

kablayakuanzakwamkutanowatakaoruhusiwakuhudhuria.

JINA______________________________________________________________________________________

SAHIHI____________________________________________________________________________________

AKAUNTIYAMWANAHISA____________________________________________________________________

MkutanowapamojawamwakawaKampuniyaMSCutakaofanyikaChuochaTomMboyaLabour,RingRoadMilimani,KisumuIjumaaDe‑

semba6,2013kuanziasaanneasubuhi.

Fomu ya uwakilishifoMu Ya uwakilisHi

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